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British Airways plc v Airways Pension Scheme Trustee Ltd

The law still stands that it’s very hard to successfully challenge trustees’ decisions if they go through the right decision-making processes, even if the challenger wheels out the big guns to throw the book at the trustees.

BA disputed the power of the trustee to amend the scheme in 2011 to introduce a new trustee discretion to apply pension increases. This power was introduced around the time when it became possible for pension increases to be determined by CPI rather than RPI. The trustee then used this new power in 2013 to grant a discretionary increase of 0.2% from 1 December 2013. However, despite BA’s best efforts, the High Court decided the trustee validly introduced the discretionary power – in doing so the trustee had not abused its powers. They had also validly gone on to exercise that power in their trustee meeting in November 2013. Although the decision is fact-specific, in deciding this, the judge endorsed the standard principles of interpretation for pension scheme interpretation. The judgment also shows the importance of trustees going through the right decision-making process when reaching a decision, i.e.:

  • They must consider all relevant factors and ignore all irrelevant factors
  • They should decide what weight to give each factor when reaching their decision
  • They can take account of the scheme’s financial position and the employer’s views, but these are only two factors among others
  • They must reach a decision which a reasonable set of trustees could reach
  • They should take professional advice as required
  • They should document the decision-making process fully in the trustee’s minutes, especially with important decisions.

Doing this means they have followed a proper process. Equally, if an employer wants to challenge trustees’ decisions, they should not delay like BA did, as it makes it harder to challenge the decision. While BA is appealing two points in the Court of Appeal, these are scheme-specific. They relate to restrictions in the BA scheme’s amendment power about the scheme not being a benevolent scheme and no compassionate payments allowed to be made from it.

Published:21 July 2017

Pensions Law Update - July 2017

Key Contact

Penny Cogher