Court of AppealWednesday 2 August 2017
British Airways v Airways Pension Scheme Trustee Ltd
In 2010 the Chancellor of the Exchequer announced the switch from RPI to CPI for future public sector pension increases. Under the Deed and Rules of the Airways Pension Scheme (APS), the same change automatically applied to APS members. This caused dissatisfaction among some scheme members, who believed that they had previously been promised RPI increases, and that CPI increases would be less valuable. The trustees of APS subsequently used their (unusual) unilateral power of amendment to confer upon themselves the power to award discretionary pension increases to members. In 2013, the APS trustees exercised this power to grant an increase of 0.2% (half the difference between RPI and CPI for that year) at a cost of £12 million. This was done without the agreement of BA as scheme employer, and despite the most recent APS triennial valuation showing a deficit of £680 million on the technical provisions basis as at 31 March 2012.
BA brought proceedings challenging the trustees’ decisions on a wide variety of grounds, but primarily that they had acted for an improper purpose in seeking to increase members’ benefits without the employer’s agreement while the scheme was in deficit, that they had contravened the express prohibition in the APS Deed on making benevolent or compassionate payments, that the member nominated trustees had improperly predetermined the outcome of their deliberation and did not properly consider how to proceed, that they acted irrationally, and that their deliberation was inadequate.
Morgan J dismissed BA’s claim, but gave permission to appeal in relation to BA’s arguments on improper purpose and the prohibition on benevolent and compassionate payments. The case is expected to come before the Court of Appeal in spring or summer 2018.