This case concerned a TPO decision in which TPO found that the rules of the Spirit (Legacy) Pension Scheme (“the Scheme”) entitled Mrs Alexis (“Mrs A”) to a bridging pension until the age of 66. The Scheme’s trustee maintained that her entitlement ceased at age 65.

Background

Broadly, “bridging pensions” are temporary, higher or additional pensions paid by occupational pension schemes to “bridge” the gap between a member drawing their scheme pension and becoming entitled to their state pension. Their exact nature will depend on the rules of the scheme.

Facts

When Mrs A was approaching retirement, she received a letter explaining that a bridging pension would be payable to her and that this would “cease at State Pension Age” (“SPA”). The meaning of SPA was not explained.  However, under the Scheme’s rules, “SPA” had “the meaning given by the rules in paragraph 1 of Part I of Schedule 4 to the Pensions Act 1995 (rules for equalisation of pensionable ages for men and women)” (“the PA95”) (see below).

Mrs A retired from the Scheme in October 2018 at the age of 60. On 4 April 2019, she wrote to the administrators to explain that she had been advised that the bridging element of her pension (“the Supplement”) would cease on her 65th birthday. Since the Government had increased her state pension age some years earlier, Mrs A claimed she was entitled to receive the Supplement until she reached age 66 (ie her actual state pension age). She then registered a complaint under the Scheme’s IDRP in early 2020.

The trustee rejected Mrs A’s claim under the, and she then took her case to TPO.

The legislation

Under the original wording of the PA95, women born before 6 April 1950 attained state pension age at 60 and those born after 5 April 1955 attained state pension age at age 65. A table identified when state pension age was attained for women born between 6 April 1950 and 5 April 1955. It rose progressively from 60 for the former to 65 for the latter.

The legislation was substantively amended in 2007 to progressively increase state pension age for both sexes to age 68 for those born between 1959 and 1978.

In 2012, amendments were introduced which accelerated equalisation for those born between April and December 1953 and increased state pension age for all persons born between December 1953 and April 1960.

Further amendments in 2014 accelerated the increase in state pension age for those born between 1960 and 1969.

Under the original legislation, Mrs A’s state pension age was 65. Following the 2012 amendments it became age 66.

TPO determination

TPO upheld Mrs A’s complaint, concluding that the Scheme’s definition of SPA was “dynamic”, ie it encompassed subsequent amendments to the PA95, including those which increased Mrs A’s state pension age to 66.

The Scheme’s trustee appealed to the High Court, arguing that the definition was “static” such that it should have the meaning of the original PA95 provisions.

High Court judgment

The judge concluded that the definition of SPA should be interpreted as being static and, as a result, Mrs A’s SPA was 65 for the purposes of the bridging pension. The reasons for this included that:

  • “if a dynamic meaning had been intended, that could have been achieved more simply by reference, for example, to the actual receipt of a state pension, without any need to refer to the relevant legislation at all”
  • the way the rules described the relevant provisions by adding “(for equalisation of pensionable ages for men and women)” indicated that the reference to the PA95 was not intended to encompass future changes on account of increases to state pension age more generally
  • this interpretation tied in with the statutory context. At the point the rules were introduced (in 2001), state pension ages had most recently been subject to reform by the PA95 (for the purposes of equalisation) and there had been no change since then. There was nothing to suggest increases to state pension age were anticipated at that time. Further, increases could well have been achieved by alternative legislation rather than by extension of the paragraph which had been referenced in the definition of SPA, and
  • the long-term nature of pension schemes made it more likely that the draftsperson would have wished “to maintain flexibility by reserving to the Trustee the ability to keep under review how any future changes to state pension age might impact benefits payable under the Scheme”.

Addressing the impact of this interpretation on the aim of the bridging pension, the judge observed that the Supplement was already “an imperfect bridge” due to the nature of its calculation. The fact that a static reading of the definition might compound this imperfection did not, in his view, militate in favour of a dynamic reading.

Comment

This is an interesting case, with the judge helpfully setting out the reasons behind their decision.  However, as with most pensions cases, trustees should note that the decision turns on its specific facts and circumstances.