Personal Pension  

Age figures prominently in redundancy/pension case

This month I will be discussing the Pensions Ombudsman’s determination in the case of Michael Heyes (PO-3333).

The ombudsman failed to uphold Mr Heyes’ complaint against ABB Ltd and the Trustees of the ABB Pension Plan in relation to the ABB Plan. Mr Heyes complained that his entitlement to an unreduced pension on redundancy (Benefit 4) under the plan was incorrectly removed from him.

Mr Heyes was a member of the Former ICI Fund Section of the plan. FIFS was set up in 2001 for former ICI employees who had transferred to ABB following the purchase of Eutech Engineering Solutions. The sale was executed through an acquisition agreement (the “2001 Acquisition Agreement”), which provided that ABB would not exercise a power of amendment relating to the plan which would adversely affect an employee in the four-year period following the purchase.

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Benefit 4 was incorporated into the plan in 2002. By way of a deed of amendment in 2005 (the “2005 Deed of Amendment”), Benefit 4 was removed for members who had either not reached the age of 50 or not completed 10 years’ pensionable service at the date of amendment.

Mr Heyes claimed that the payment of Benefit 4 should have been triggered by his redundancy in December 2010. He met the requisite requirements in that he was over 50 years old at the time of his redundancy and had completed at least 10 years’ service. He should not have been “excluded” from Benefit 4 by the 2005 Deed of Amendment, since Benefit 4 was removed without his consent and such removal was contrary to both section 67 Pensions Act 1995 and the plan’s power of amendment.

The respondents’ position was that, due to the 2005 amendment, in order for Mr Heyes to be eligible to receive Benefit 4, he must have reached age 50 by the date of the 2005 Deed of Amendment. He did not fulfil this requirement and therefore was not eligible to receive Benefit 4. Further, Benefit 4 was not an entitlement or accrued right and therefore section 67 PA 1995 did not prevent the respondent from making changes as per the 2005 Deed of Amendment.

The Pension Ombudsman did not uphold Mr Heyes’ complaint. It was found that the amendment to Benefit 4 did not breach the terms of the 2001 Acquisition Agreement, since the amendment was not carried out within the four-year period following the acquisition.

Further, Mr Heyes was not entitled to the payment of Benefit 4. Such payment was contingent on both Mr Heyes being 50 years of age or over and having 10 years’ or more pensionable service at the time of the 2005 Deed of Amendment.

Neither did Mr Heyes have an accrued right to Benefit 4 at the time of the 2005 Deed of Amendment, since he did not qualify to receive Benefit 4 in 2005. This meant that the amendment was not prohibited under section 67 PA 1995 and did not breach the rules of the plan.

Finally, the ombudsman found that the closure of FIFS in 2001 did not directly relate to the transfer in 2001. No evidence had been provided to demonstrate that the closure of FIFS was directly related to the transfer. In particular, there was no clear evidence that in the four years post-acquisition, ABB had clear plans to amend Benefit 4 in 2005.