Case Law
Arcadia Group Pension Trust Ltd v Smith [2025] EWHC 11 (Ch) – Merger of schemes in wind-up approved
The Arcadia Group Pension Scheme ("Staff Scheme") and the Arcadia Group Senior Executives Pension Scheme ("Exec Scheme") were to be wound up following the liquidation of Arcadia Group Limited.
The proceedings came about because the Trustee of the Staff Scheme wanted to amend governing documentation so as to be able to accept a bulk transfer-in to the Staff Scheme of the beneficiaries, assets and liabilities of the Exec Scheme on an unsegregated basis. But for the fact that the claimant intended to use the power to amend the Staff Scheme at a time when both it and the Exec Scheme were in the course of being wound up and Arcadia was in liquidation, the proposal would be uncontroversial, however, in light of the late stage at which the power was to be exercised, the claimant considered it was appropriate to seek confirmation that there was no fetter on the power to amend and its use was for a proper purpose; and given that the decision can be characterised as a momentous one, the court's approval was also sought.
In addition whilst the Staff Scheme was in surplus the Exec Scheme was in deficit and the merger would result in the surplus being shared amongst all beneficiaries.
Factors taken into account in the Court's decision to approve the merger included:
(i) The unrestricted nature of the power to amend. Having amended the Staff Scheme to exclude new members and mergers there was no fetter on the power being exercised to reverse that amendment if circumstances warranted.
(ii) The manner in which the main object of the scheme was defined and the fact that the main object of funding Basic Entitlements (ie full scale benefits) could be achieved notwithstanding the merger. A merger of the two schemes would not deprive members of the Staff Scheme of an entitlement in accordance with its Main Objects. It merely diluted their contingent interest in augmentation.
(iii)The close relationship between the Staff and Exec Schemes. In using the surplus in the Staff Scheme to benefit members of the Exec Scheme the claimant would be providing pension benefits the principal employer intended those members to receive, albeit the intention was that they would receive those benefits through the Exec Scheme.
(iv)The shared objective of trustees to achieve a surplus in both schemes. That objective was pursued with the benefit of advice from shared professional advisers.
(v) The fact that there was a surplus in the Staff Scheme and a deficit in the Exec Scheme was an unintended consequence of forces outside of the control of the trustees.
Verity Trustees Ltd v Wood (PE-2023-000004)
Verity Trustees Limited v Wood and another is a Part 8 application brought by the sole trustee of The Pensions Trust seeking directions in relation to amendments to the scheme. It is expected this case will consider questions arising out of the Virgin Media case.
The case was heard on 12 -14th February 2025 – at the time of writing no published report of the case is yet available.
New Law
The Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling) Order 2025
This Order specifies the earnings percentage used to calculate the levy ceiling and the amount of the levy ceiling for use in relation to the Pension Protection Fund in the financial year beginning 1st April 2025.
Article 3 of this Order specifies that the increase in the general level of earnings for the period from 1st August 2023 to 31st July 2024 is 4%. Accordingly, article 4 of this Order specifies that the levy ceiling for the financial year beginning on 1st April 2025 is £1,403,184,443.44.
News
PPF levy flexibility to unlock millions of pounds for growth
The Government is considering proposals to allow the Pension Protection Fund (PPF) greater flexibility to reduce the levy it collects from pension schemes by relaxing restrictions.
Under current rules, the PPF is restricted in the changes it can make to the levy it collects from schemes despite the PPF being in a strong financial position, following years of high levels of levy collected creating a secure cushion for DB pension funds.
As part of the Government’s Plan for Change the Government's view is that removing this restriction will boost the amount of money schemes have to invest and that employers have to grow their business (as less would be paid each year to the PPF).
PPF decision on levy
The levy estimate will be reduced to £45m for 2025/26, a significant reduction on the £100m estimate initially proposed. The PPF has confirmed that this will be the lowest ever levy and almost all schemes - 99.7 per cent – are expected to see a reduction in levy next year.
Additionally a new provision has been included in levy rules that enables the PPF Board to calculate a zero levy if appropriate legislative changes (that would permit this greater flexibility in setting the levy) are brought forward, and sufficiently progressed, in the course of 2025/26.
If you have any queries about any of the issues covered, or you require advice on a pensions related matter, please do not hesitate to contact your usual contact.
