“Interests means interests?”: Fetters on pension scheme amendment powers after 3i plc v Decesare

Article by Joseph Steadman

1. In Gleeson v J. Wippell & Co [1977] 1 WLR 510, Megarry VC described the word “interest” as being of a “protean nature … a term which at times seems almost capable of meaning all things to all men”.
2. Almost fifty years on, and in a wholly different context, the truth of that observation has been illustrated in the recent case of 3i plc v Decesare [2025] EWHC 3023 (Ch).

The context: the BBC case

3. The meaning of the word “interest” in the context of a pension scheme amendment power has been brought into focus over the past couple of years following the decisions of the High Court [2023] EWHC 1965 (Ch) and Court of Appeal [2024] EWCA Civ 767 in British Broadcasting Corporation v BBC Pension Trust Limited.
4. The fetter in the BBC case provided that no alteration or modification could take effect “as regards the Active Members whose interests are certified by the Actuary to be affected thereby” (emphasis added) unless certain conditions were satisfied.
5. The Court of Appeal upheld the High Court’s decision that in that context, the word “interests” included “the ability of members to accrue future service benefits under the scheme as it stood before any variation”. (For more detail on the BBC case, see my notes on the High Court and Court of Appeal)
6. That unusual outcome – the first time that the Court of Appeal had ever found that a fetter on a pension scheme’s amendment power protected future service benefits, and only the second time any other domestic court had done so – prompted many pension schemes to reconsider a longstanding assumption that fetters on pension scheme amendment powers will naturally be construed as protecting only members’ past service benefits rather than their future service benefits. Schemes began to look back over years, or even decades, to see whether the validity of past amendments night be called into question.

The question: the 3i Pension Plan

7. One such pension scheme was the 3i Pension Plan (the “Plan”). Although the fetter to the relevant amendment power was worded differently from the fetter in the BBC case, it also used the word “interests”. If the meaning of the word “interests” included future service benefits, then that would call into question the validity of a deed made in 2010 which had purportedly closed the Plan to further accrual (the “Closure Deed”).
8. In the many years since 2010, all parties had worked on the basis that the Closure Deed was valid and that the Plan had been closed to further accrual. Indeed, 3i had provided a separate defined contribution arrangement to its employees.
9. Fast-forward to 2024, and the Plan was in the process of winding up. That meant that the question the BBC case raised regarding the validity of the Closure Deed was of immediate practical importance. As part of the winding up process, and on the footing that the Closure Deed had brought to an end the accrual of benefits, individual annuities had been issued and assigned to members. That left a surplus – estimated to be approximately £83 million – which the Plan trustees proposed (following a statutory consultation process) to pay to the employer.
10. Before taking a final decision as to the distribution of the surplus, the Trustees considered it appropriate to obtain confirmation from the court as to the meaning of the fetter and in turn the validity of the Closure Deed. 3i therefore commenced proceedings asking the Court to determine that question.
11. The fetter on the Plan’s amendment power provided that no modification could be made if it would “… diminish any pension already being paid under the Plan or the accrued rights or interests of any Member or other person in respect of benefits already provided under the Plan …” (emphasis added).
12. The question for the Court was therefore whether the word “interests” was – as in the BBC case – so broad as to include future service benefits, or whether it was limited to past service benefits.

The answer: “it depends”

13. The Court was clear that it was necessary to consider the fetter on the Plan’s amendment power on its own terms. As Lewison LJ had pointed out in the BBC case at [28], fetters on pension scheme amendment powers may bear a “family resemblance” but ultimately the meaning of a particular clause turns on its own interpretation (i.e. its specific wording, interpreted in context).
14. The fact that the word “interests” was construed broadly in the BBC case – where it appeared “untethered to any composite phrase” – did not mean that it should be construed broadly in the context of the Plan.
15. In fact, as Richard Smith J put it at [69]:

… it is pertinent in my view that, far from being “untethered”, the word “interests” in this case does feature in a composite phrase.  It also features in conjunction with the word “rights”.  Both words are then qualified by the same expression “already provided under the Plan”, echoing the “already being paid” language of the first element.  There is nothing in that composite phrase to suggest that the relevant “interests” are concerned with future service accrual.  To the contrary, and reinforced by the word “accrued” before “rights or interests”, its focus is very much on what has already occurred.

16. Moreover, there was nothing in the surrounding context – such as the way the words “interests” and “rights” were used elsewhere in the Plan’s governing documents – which justified a departure from that conclusion.
17. In the context of the Plan, therefore, “interests” referred only to past service benefits, and it followed that the fetter had not prevented the making of the Closure Deed.
18. The Court’s decision indicates once again that it is futile to search for a single meaning of the word “interests”. The true answer is “it depends”. As Lewison LJ put it in the BBC case at [49]:

…it is a fallacy to treat the words of an English sentence as building blocks whose meaning cannot be affected by the rest of the sentence. The unit of communication by means of language is the sentence and not the parts of which it is composed. The significance of individual words is affected by other words and the syntax of the whole.

19. In other words, the decision in the BBC case showed that the word “interests” could be so broad as to include the ability to accrue future service benefits, not that the word “interests” would always be construed in that way.

The future: all clear?

20. To some extent, pension scheme employers and trustees can breathe a sigh of relief. There is now clear authority that a fetter which includes the word “interests” will not necessarily be construed as including the ability to accrue future service benefits.
21. However, it will still be important to consider on what basis it can be said that the meaning of the word “interests” is limited to past service benefits, for example by being “tethered” to a “composite phrase” such as “accrued interests” or “interests in the fund”. And where that cannot be said with certainty, it may well remain necessary to seek confirmation from the court before taking significant decisions such as whether to make a distribution of surplus.

Joseph Steadman appeared with Brian Green KC as Counsel for 3i plc in 3i plc v Decesare, instructed by Slaughter and May. He writes here in his personal capacity.

Fenner Moeran KC acted for the First Defendant, John Decesare (representative member of the 3i Group Pension Plan), instructed by Burges Salmon.

Michael Tennet KC acted for the Second and Third Defendants (trustees of the 3i Group Pension Plan), instructed by Linklaters.

Read the full judgment