(2 min read)
What is the legal position if pension scheme rules define a term (eg “state pension age”) by reference to a definition in legislation, but the legislation is subsequently amended to substitute a different definition? Does the change in legislation have the effect of amending the scheme rules? This was the issue the court had to consider in the case of Spirit (Legacy) Pension Trustees Ltd v Alexis. We consider the implications of the court’s decision for the interpretation of pension scheme rules.
The High Court has allowed an appeal by a scheme trustee against a Pensions Ombudsman decision which had concluded that a member was entitled to a bridging pension until age 66 (Spirit (Legacy) Pension Trustee Ltd v Alexis). The scheme rules provided for a bridging pension that would cease at “State pension age”, defined by reference to “the rules in paragraph 1 of Part I of Schedule 4 to the Pensions Act 1995 (rules for equalisation of pensionable ages for men and women)”. The trustee argued that this reference was static, meaning that it referred to the legislation as originally enacted in 1995 under which the member’s state pension age (SPA) was 65. The member argued that the reference was “dynamic”, meaning that it had been altered by subsequent amendments to the original legislation which had increased her SPA to 66.
The judge held that the correct interpretation was that the reference was static. The judge noted that under existing case law, where a contract or deed incorporated provisions of a statute, there was no presumption either way as to whether the reference was to the legislation as it stood at the time or as subsequently amended. In the case in question the judge found it significant that the draftsperson had described the statutory reference as being “for equalisation of pensionable ages for men and women”. This indicated that the reference was not intended to incorporate future changes to SPA generally. The judge also noted that in 2001 when the scheme rules were introduced, there was nothing in legislation to suggest that increases to SPA were anticipated. He considered that the reference to legislation was used as a “convenient shorthand” and that it would be rare for parties to intend such a situation to “vary unpredictably with the vagaries of future legislation”.
Our thoughts
This judgment does not mean that a court will always find that a reference to state pension age as defined in legislation should be construed by reference to state pension age at the date of the rules in question. However, the case is a useful indicator of the factors a court will consider when deciding whether a term defined by reference to legislation should be construed as having a “static” or “dynamic” meaning if the legislation is subsequently amended.
