CH-2024-000162 - [2025] EWHC 2237 (Ch)

As the Trustee fairly accepted when it applied for permission to appeal, and Richards J recognised when he granted it, matters were put before the Ombudsman in somewhat different terms from how they were argued on the appeal, with the emphasis before me on the draftsman’s description of the legislative reference in Rule 5.5, as well on the non-normative nature of that reference.

As a preliminary matter, I accept that there is no presumption either way as to whether the reference in Rule 5.5 to paragraph 1 of Part I of Schedule 4 to the Act is to that for the time being in force.

In this case, the legislative reference is used to define the necessary factual conditions for initial and continuing eligibility for payment by the Scheme of a member’s pension without reduction on account of the Pensionable Deduction. Such eligibility itself is not found in statute but in the operative provisions of the 2001 Rules. This contrasts with other legislative references in the 2001 Rules which do perform a normative function including, for example, compliance (in different contexts) with laws as to ‘contracting-out’, ‘preservation of benefit’ and ‘revaluation of accrued benefits’ in the Pension Schemes Act 1993 or, as referred to in the Decision, ss.36 and 40 of the Act with respect to the exercise of the Trustee’s investment powers. Given the more limited function performed by the legislative reference in Rule 5.5, I agree that this falls more naturally on the ‘convenient shorthand’ side of the line.

Unpacking the language of that shorthand, paragraph 1 of Part I of Schedule 4 to the Act is somewhat lengthy and complex. As such, it is unsurprising that a statutory reference might be used rather than reproducing the statutory text. This technique does not, in itself, suggest an intention to refer to the legislation as it might apply from time to time. Perhaps of greater significance, however, is 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.

Of greater significance still are the express words of that shorthand, not limited to a reference to the rules in paragraph 1 of Part I of Schedule 4 to the Act, but going on to explain in the draftsman’s language (in parentheses) the purpose of those rules, namely “for equalisation of pensionable ages for men and women”. In my view, that limited description by reference to equalisation indicates that the reference to the Act was not intended to encompass future changes on account of increases to state pension age more generally.

This point ties in with the statutory context. When the 2001 Rules were introduced, state pension ages had most recently been the subject of reform by way of equalisation achieved through the Act. There had been no change in the legislation since 1995 and, therefore, nothing in the statutory context to suggest in 2001 that increases to state pension age more generally were anticipated, let alone by way of later amendment to that particular paragraph of Schedule 4. Indeed, the next major reform to increase state pension age was introduced in 2007, an increase that could easily have been effected through an alternative legislative route rather than by extension of the same paragraph in which the equalisation measures had been introduced more than a decade earlier.

In my view, the above matters militate firmly against a dynamic interpretation. The Trustee refers to such an interpretation as tantamount to writing a ‘blank cheque’. I prefer the language of Ashworth Frazer as to the rarity of parties who have used a convenient statutory shorthand to describe a factual situation intending that situation to vary unpredictably with the vagaries of future legislation. Although the Ombudsman considered that there was some expectation that laws will change in the context of the long term nature of pension schemes, it did not seem to me that it would be evident in 2001 that there would be future changes on account of increases to the state pension age beyond the equalisation measures introduced in 1995. Moreover, the long term nature of pension schemes seemed to me to be one of the reasons why the draftsman of the 2001 Rules would wish to avoid unnecessarily tying the Scheme benefits payable to members to unpredictable future changes to state pension legislation.

Much more likely in my view is that the draftsman would wish to maintain flexibility by reserving to the Trustee the ability to keep under review how any future changes to the state pension age might impact benefits payable under the Scheme and whether amendments to the 2001 Rules might be appropriate on that account. Were it otherwise, the constraints on the Trustee’s power to amend with the consent of the Principal Employer (in particular, Rule 27(ii) of the 2001 Rules) would mean that the effects of a dynamic reading of Rule 5.5 could not be reversed, at least prior to the introduction of certain new legislation in 2013 which amended the Pension Protection Fund and Occupational Pension Schemes (Modification of Schemes) Regulations 2006 (SI 2006/759). That legislative development too could not have been contemplated in 2001.

Although not described as such in the 2001 Rules, the supplement does perform a ‘bridging’ role pending payment of state pension. However, being some fraction of the lower earnings limit, the supplement is not a match for the state pension and therefore already acts as an imperfect bridge. The fact that a static reading of Rule 5.5 might, with subsequent legislative changes to increase state pension age, compound that imperfection in the form of a possible gap between the last payment of the supplement and actual receipt of the state pension does not, in my view, militate in favour of a dynamic reading.

The Trustee fairly raised a number of further matters that might point to a possible dynamic construction of Rule 5.5, some not before the Ombudsman. Of greatest significance in this regard was Rule 6.2 of the 2001 Rules. This contains a defined term “State Pension Age”, slightly different from the defined term “State pension age” in Rule 5.5. Despite that difference, the underlying definition is identical for both. As to the context for its use, Rule 6.2 permits the Trustee to allow members whose Scheme pension is in payment before “State Pension Age” to choose to increase it before that age and reduce it thereafter so that the member’s pension before is “more nearly” equal to the member’s combined pension from the Scheme and the State thereafter. Given the temporal references, it could be said that the effect of Rule 6.2 is to equate “State Pension Age” with when the state pension comes into payment such that a dynamic interpretation is to be preferred which, given the same language of both definitions, should be read across to Rule 5.5 as well.

Although Rule 6.2 uses a definition which contains identical wording to Rule 5.5, I accept the Trustee’s contention that they are, in fact, separate definitions that apply to the particular rules concerned. That much is evident from the apparently deliberate use of slightly different defined terms in each rule, with the meaning of each stated to be for the purpose of the particular rule in which it features. More substantively, those purposes are different, Rule 5.5 being concerned with a member’s entitlement to a particular supplement or bridging payment, Rule 6.2 with the potential exercise of the Trustee’s discretion to pay the Scheme pension in a manner which ‘evens out’ a member’s aggregate Scheme and state pension income. As the Trustee also notes, Rule 5.5 comes at a cost to the Scheme whereas Rule 6.2 might be expected to be cost neutral. It also appears that the circumstances in which Rule 6.2 might apply are broader.

Finally, a number of the other considerations above with respect to the meaning of Rule 5.5 are also relevant to Rule 6.2. For example, despite its temporal references, Rule 6.2 does not expressly equate “State Pension Age” with actual receipt of state pension. Moreover, the description of that legislation used by Rule 6.2 is again concerned with the equalisation of pensionable ages for men and women, not increases in state pension age more generally. Although those increases from 2007 onwards may add complexity, Rule 6.2 too would still appear to be workable on its terms based on the legislative position in 2001. Ultimately, however, it is not necessary for me to reach any final view on the meaning and effect of Rule 6.2. For present purposes, I am satisfied that its co-existence with Rule 5.5 in the 2001 Rules does not materially advance the analysis.

As for the other matters which might suggest a possible dynamic interpretation of Rule 5.5, the Trustee pointed to the Scheme’s administrative practice not to adopt a strict, static interpretation rather than defining “State pension age” by reference to the legislation in force at the time the relevant member leaves service. According to correspondence from the Trustee’s solicitors following the hearing, even if I were to find the static interpretation to be the correct one, that practice will continue with the consent of the Principal Employer and the exercise of such powers as are required for that purpose. I accept that this practice does not assist in the proper interpretation of Rule 5.5. My view is based not only on the limited utility for construction purposes of such practices indicated by the authorities (De la Rue at [107]-[108]), but also the fact that the Scheme’s practice here does not coincide with a construction contended for by either party.

The Trustee also referred me to a Scottish & Newcastle Staff Pension Scheme booklet which appears to have been drafted around 2000. This was not produced to the Ombudsman rather than in the context of this appeal. That booklet refers (at [8]) to the supplement being payable until “State Pension Age”, with “State Pension Age” defined (at [5]) as “the age at which you become eligible for pension benefits from the State…”. Although the Trustee was correct to draw this matter to my attention, I accept that such descriptions of scheme rules are not relevant to my determination (Lloyds Bank Pension Trust [1996] Pens LR 263 at [24], applied in ITN v Ward [1997] Pens LR 131 at [23] and Akester v Kingston [2005] Pens LR 153 at [85]). The language of the booklet does, however, show that a dynamic meaning could easily have been achieved without any legislative reference.

Finally, I was also referred to the Interpretation Act 1978. Like the Ombudsman, I did not consider that this offered any assistance. S.20(2) is concerned with, amongst other things, statutory amendments, but this does not apply to deeds. Even if it did, I accept that it would not apply to amendments post-dating the deed. I also agree that ss.17(2)(a) (repeal and re-enactment) and 19 (citation of other Acts) are not relevant in the present context.