UK - The trustees of the KPMG Staff Pension scheme have been awarded a comprehensive victory after the Court of Appeal gave its decision that KPMG had a "statutory obligation" to fund the deficit in the scheme.
The city law firm Pinsent Masons acted for the pensioners, following High Court proceedings in July 2004 to establish whether it was a defined contribution or a defined benefit scheme.
The Court of Appeal (Lord Justices Mummery, Chadwick and Jonathan Parker) upheld the decision that the scheme was not a money purchase scheme, contrary to what KPMG argued.
Previously, KPMG said that the scheme was in fact a money purchase scheme and that there was therefore no funding obligation on it to “make good” the scheme's deficit, believed to be in excess of £60-70m.
But most importantly for the pensioners, the Court of Appeal also ruled in their favour in finding that the rules of the scheme do not allow pensions in payment to be reduced, overturning the High Court's decision.
Chris Mullen (pictured), senior partner at Pinsent Masons, who acted for the pensioners both in the High Court and in the Court of Appeal, commented: “The Court of Appeal's decision that the scheme is not a money purchase scheme and that pensions in payment cannot be reduced are a huge relief to the pensioners after many months of uncertainty.
“Since they are retired, our clients have no ready means to make up any cut in their pensions. KPMG will now be obliged to fund the scheme's deficit, just like any other defined benefit scheme.”
Additionally, the Court of Appeal denied KPMG permission to appeal to the House of Lords against the decision.
However, KPMG may decide to petition the House of Lords for permission to appeal.
Last year, the legal action was commenced by the trustees of the scheme to answer specific questions about the nature of the scheme and the meaning of certain rules within it.
The pensioners, through their solicitors and Counsel Robert Ham QC and Michael Tennet argued that the scheme was an average salary scheme, not a money purchase scheme, and that section 67 Pensions Act 1995 and the terms of the rules themselves prevented the exercise of a power to reduce pensions in payment.
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