UK - Industrial giant Lonrho Africa has been denied access to a subsidiary's pension scheme surplus after the High Court ruled trustees had sole power to increase benefits.
The ruling settled a dispute between Law Debenture – the sole trustees of the £50m John Holt Pension Scheme – and Lonrho over whether a scheme rule granted the trustees the power to augment benefits with or without the employer’s consent.
Lonrho – John Holt’s parent – claimed this was not the intended reading of the clause and that it was also contradictory to other scheme rules.
However, Eversheds – representing John Holt Pension Scheme members – presented evidence to show that the clause, despite its irregularity, was put there purposefully as “predator protection” when Lonrho acquired the firm.
Head of pensions Giles Orton said: “The clause was put there to keep Tiny Rowland’s and Lonrho’s hands off the surplus.”
The fund’s surplus – thought to be in excess of £20m – is now being distributed among the scheme’s 1000 members under Revenue limits.
But leading actuaries have warned that the ruling could set a dangerous precedent among trustees whose trust deeds are similarly flexible.
Mercer Human Resources European partner Matthew Demwell said: “If an employer believes that in the good times it will have the surplus taken away and in the bad times they will be forced to pay, this will give an incentive to employers to fund pension schemes at the lowest possible level, which is not good for member security.”
Hammond Suddards Edge solicitor Matthew Giles added that if the case had gone to OPRA for settlement then Lonrho would have been more likely to win a compromise agreement sharing the surplus with the members.
Lonrho has until January 13 to appeal the decision.
*Last month it was revealed that members of the £100m Thorn pension scheme had won the right to its surplus after the principal employer, Nomura, backed down in its request for modification of the scheme rules.
Last July British Airways Pension Scheme members also won their long-running battle to stop “surplus cash” being paid to the airline giant.
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