Foster Wheeler v Hanley: The Court of Appeal decides

Comment from Sacker & Partners LLP:

The highly anticipated Court of Appeal decision in Foster Wheeler Limited v Hanley & ors (the latest in a long line of equalisation cases) was handed down today.

The company and trustees had closed the Barber window by means of implied consent (effectively allowing members to take benefits unreduced between 60-65). Construing the scheme rules, the High Court judge concluded in 2008 that where members have mixed accrual (with normal retirement ages of 60 and 65 inside and outside respectively of the Barber window) they can take all of their benefits from age 60. The requirement for consent was therefore inapplicable.

Although the Court of Appeal rejected the company's argument that pension benefits should be split (and a distinction drawn between periods of pensionable service before, during and after the Barber window), it did agree that members are entitled to take all of their benefits at age 60. However, it reached this conclusion for different reasons than the High Court, focussing specifically on the deferred pension rule which allowed benefits to be actuarially reduced for early payment.

Robin Simmons, partner, comments: “The appeal can rightly be hailed as a good result. It demonstrates the judiciary's willingness to find ways to reach the ‘right’ solution. The High Court's decision resulted in a windfall for certain members and the Court of Appeal was at pains to find a workaround within the confines of the scheme's rules. It has succeeded in doing so on a construction of the particular scheme's rules. Other possibilities - such as splitting periods of benefits - might work in other cases.

But the Court of Appeal has gone further in sending a positive message to other pension schemes with difficult equalisation issues. The judges stated that schemes should only be treated as amended, with minimum interference, to give effect to equalisation. And, in a steer for employers and trustees to work together to find solutions for their particular scheme, the Court of Appeal stated that ‘it must be much more satisfactory, from every point of view, if the task of ensuring compliance with [European] law can be accomplished in the case of most schemes without recourse to the court.’”

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