Edge -v- Pensions Ombudsman - Court of Appeal decision on 29 July
Edge -v- Pensions Ombudsman - Court of Appeal decision on 29 July
This is an important decision which helps to clarify the considerations which trustees should make when exercising their discretionary powers. The case also contains some useful guidance on the limits of the Pensions Ombudsman's jurisdiction.
The case looked at use of surplus in an ongoing scheme. The trustees decided to augment benefits for active members and to reduce member and employer contributions. Following a complaint, the Ombudsman held that in failing to improve benefits for pensioners, the trustees had breached a duty to act impartially between all classes of members.
In upholding the decision of the High Court, the Court of Appeal decided that:
(1) The duty of impartiality referred to by the Ombudsman is no more than the ordinary duty for trustees to exercise their powers fairly for the purpose for which they are given, giving proper consideration to relevant matters and disregarding irrelevant ones. Having done that, trustees cannot be criticised if they come to a decision which appears to prefer the interests of one group (including employers) over another. In the circumstances of the case the trustees had exercised their discretion properly.
The Court also suggested some factors which it would be proper for trustees to consider when exercising a discretion. These include consideration of the impact their decision would have on the employers and the market norm for benefit levels in comparable schemes.
(2) The Court also reviewed the jurisdiction of the Pensions Ombudsman. It decided that he cannot investigate class action cases where the success of one set of members' claims would have an adverse impact on another group of members.
However, the ruling did not cover cases which have scheme-wide effects but do not pitch one set of members against another. These may still be within his jurisdiction.
For further information, please contact Nigel Moore on tel: 0171 367 300 or e-mail: ncm@cms-cmck.com.
