The Pensions Regulator (TPR) has said there is no legal basis for the Halcrow Pensioners' Association (HPA) to challenge the proposed restructuring of the scheme in the Upper Tribunal.
Irwin Mitchell acting on behalf of the HPA which represents around 500 members, is disputing a plan to overhaul the engineering company's defined benefit (DB), the Halcrow Pension Scheme.
It has submitted a case to the Upper Tribunal of TPR, contesting the proposed regulated apportionment arrangement (RAA). This would see the sponsoring employer being severed from the scheme with members going into the Pension Protection Fund (PPF).
However, the Pensions Regulator's (TPR) senior case manager Adam Fountain-Johnston said in a letter dated 18 July seen by PP that certain conditions for a full Upper Tribunal hearing were not being met.
Firstly, he said HPA vice-chair and Halcrow scheme member Edward Evans who submitted the request would not be entitled to make reference in the hearing. This was because, according to TPR, he is not directly affected by the RAA. Instead, the regulator determined that under the Pensions Act 2004, it the trustee who is directly affected by the RAA rather than the members.
Secondly, TPR determined Evans and other individual members would not be affected by the Upper Tribunal determination and so would not be entitled to make a reference in relation to the RAA.
The watchdog cited the legal case LB Re Financing No 1 Ltd & Ors v Trustees of the Lehman Brothers Pension Scheme & Ors  as a comparison.
Here, members' interests were perceived as derivative interests that were causally rather than directly affected by the RAA.
It determined members with derivative interests were already adequately represented by holders with a more direct interest, namely the trustee.
Furthermore, TPR's letter quoted the Court of Appeal's determination in the case that those without an interest were sometimes perceived as ‘mere busybodies'.
"There are some 3204 members of Halcrow scheme," said Fountain-Johnston. "It would be unworkable for all of them...to have the right to make submissions to the Upper Tribunal."
PP understands the tribunal has contacted all parties involved to check their availability over the next two weeks for a preliminary hearing to determine whether HPA's request for a full hearing is valid. If upheld, statements will be provided by all parties involved along with disclosure of documents, which will pave the way for a full hearing which could take place in August.
The regulator suggested listing an oral hearing as soon as practicable to deal with the directly affected parties issue is likely to be the "simplest and quickest way to dispose of it".
It also asked that in the interim the purported reference is not entered into the register. This is a record of the Upper Tribunal where requests for cases to be heard are logged.
Irwin Mitchell pensions partner Martin Jenkins said he had never seen an Upper Tribunal case being struck from the record, adding to infer that Halcrow Pensioners Association was mere busybodies was an "unfortunate" expression.
"It's an unusual procedure the regulator is adopting," said Jenkins. "HPA are astounded at the suggestion that members in a pension scheme affected by a significant reduction in benefits are not affected. It seems a narrow, technical way to challenge a really significant matter.
"When does the number of corresponding HPA members become a legitimate body representing the interests of people whose incomes are going to be cut?
"An individual is allowed to go to the court and make an application. This is not a purported reference but a reference by members who were involved in an attempt to have their benefits taken away from them without them even being told."
He also challenged similarities drawn between Halcrow and the Lehman Brothers Pension Scheme case, saying latter is not so relevant.
"As far as HPA is concerned what was decided in the Lehman's case isn't so relevant here as it involved a rich and very involved overseas parent is seeking to negotiate a deal with the scheme members," he added.
TPR defends letter
A TPR spokesperson said it was not suggesting members are unaffected by the decision to agree a restructuring, because "clearly they are."
"We are making the point that, in law, only directly affected persons can refer regulatory decisions to the Upper Tribunal for review.
"Legislation sets out that the regulator determines who is a directly affected person and in this case we were satisfied the pension trustee was one such person who is also to represent all members' interests. This is consistent with previous case law."
The spokesperson added the regulator firmly believes the agreed restructuring is the best outcome that could be achieved in very difficult circumstances.
The Upper Tribunal also has the discretion to determine who is a directly affected person.
"It is now for the Upper Tribunal to decide if it accepts the representations of a member of the scheme that they should be treated as a directly affected person."
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