Reference: (2002) 02 PBLR (16)
The employer operated a final salary scheme, of which the complainant was a member. In 1990 the employer closed the final salary scheme and offered its employees membership of a new money purchase arrangement. The complainant transferred his benefits into the new scheme and was told that the aim was "to provide you with the same level of pension" as under the final salary scheme "but the extent to which this will be possible will depend on a number of factors including the level of contributions" and that the employer would "contribute the balance of the cost of benefits". In 1997, the scheme was closed and employees were given the chance to join a group personal pension arrangement (GPP). Members were told that the GPP would provide "at least the same benefits to members as the old scheme for the future" and that they would "not lose any of the benefits which they have earned to date". When the complainant enquired about his benefits in 1999, he discovered that he was significantly worse off than he would have been under the final salary arrangement. He complained to the Pensions Ombudsman.
The Ombudsman determined that the employer had promised to pay the "balance of cost of the benefits". It was difficult to put any interpretation on these words other than a promise to pay whatever contribution was required to provide the level of benefits under the original final salary scheme. The employer was ordered to pay any contributions required to provide the level of pension that the complainant would have received under the final salary scheme. The employer appealed.
In setting aside the Ombudsman's determination, Ferris J held that the reference to the employer meeting the cost of the benefits did not amount to a promise to meet the cost of replicating the final salary benefits. This turned on the wording of the communications to the member, but Ferris J did say that one of the main considerations which led the employer to substitute the final salary scheme for the later arrangements was control over costs. If the employer had given the promise found by the Ombudsman, it would have surrendered this benefit and it is difficult to see what purpose would then be served by switching from the final salary scheme.
The court also considered what right, if any, the Pensions Ombudsman had to be heard on the appeal. There was no such right in the Civil Procedure Rules. The Ombudsman can only appear and make submissions with the permission of the court. However, Ferris J said that he would expect such permission to be freely given.
A separate ruling was made on costs. The Ombudsman is, like any other party in ordinary litigation, liable for the successful appellant's costs.
