Pensions Insight: 8 July to 15 July 2024

In this insight we report on the Court of Appeal decision that an amendment power proviso relating to active members’ interests covers both past and future service, the latest election news and TPR’s evolving approach to master trust supervision.

Court of Appeal dismisses employer’s appeal

In a judgment handed down on 9 July 2024, the Court of Appeal (Lewison J providing the only judgment) has dismissed an employer’s appeal, upholding the High Court’s finding that a proviso in the amendment power of a defined benefit pension scheme relating to active members’ ‘interests’ protects both past and future service benefits.

This means that the ability of the employer to make amendments which will ‘substantially prejudice’ future benefit accrual is significantly curtailed, including changing the basis of ongoing accrual and closure of the scheme to future accrual.

Although the amendment power in this case was particularly restrictive, schemes with similarly worded amendment powers will wish to consider the impact of the decision on both past and future amendments.

The Court of Appeal’s consideration of the interpretation of deeds and rules is also of interest confirming previous court decisions that the focus should be on a textual analysis of deeds and rules when construing the meaning of provisions with less weight on the ‘background factual matrix’ that might be appropriate in a commercial contracts position. It also noted that applying a ‘reasonable and practical’ construction of an amendment power provision to avoid undue fettering and to allow for the “exigencies of commercial life” was not an autonomous or overriding interpretation principle which necessarily requires an amendment power proviso to be interpreted in a way that permits the employer to address increased funding costs and discrepancy in pension provision between different employees.

See our case summary for a more detailed analysis of the case.

TPR adopts evolving approach to master trust supervision

On 8 July 2024, the Pensions Regulator (TPR) announced that how it supervises master trusts (DC) is ‘evolving’ to ‘focus’ on investments, data quality and standards, and retirement innovation – standing behind this is value which “has to be the guiding light for all that we [TPR] do”. TPR has already begun implementing its new approach through changed engagement on investments including how the investment approach delivers for savers and governance and decision-making.