In 2018, a case was brought before the High Court by Mitchells & Butlers to decide who, under the Plan’s Rules, has the power to vary the rate at which pensions in payment are increased and deferred pensions are revalued before they come into payment (known collectively as ‘pension increases’).
After a delay caused by the pandemic, the trial took place between 30 June and 22 July 2021 in the High Court in front of Mr Justice Trower. The Court handed down its judgment on 12 November 2021 and decided the Rules of the Plan should be rectified so that:
- the Trustee has the power to choose the index which is used for pension increases, and
- the Company does not have the power to vary the rate of pension increases.
Following the judgment, the Trustee took advice and agreed that RPI should remain the measure of inflation for pension increases.
It remains open to the Trustee to change this decision in future, should the Trustee consider it appropriate to do so at any time. However, if any such change were to be made, it would not retrospectively affect any increases to which members had already become entitled at the time of the change. (For the avoidance of doubt, the Trustee does not have any plans to move away from RPI, but it is required to keep the matter under review in accordance with its fiduciary duties.)
RPI-based pension increases would have been more generous during the four-year period from 2018 to 2021 than the Court-approved interim arrangement which saw increases for affected members linked to CPI. As a result, it was agreed that pensions in payment for affected members should be retrospectively topped up where necessary.
Affected members (or dependants) in receipt of a pension will also receive a restorative lump sum to compensate them for these historically lower payments, which will be paid through the pensioner payroll. If you are in receipt of a dependant’s pension which commenced after October 2018, then any restorative payments due to you also accounts for adjustments made in respect of the late member’s pension, relating to their pension entitlement between October 2018 and their date of death.
If you are an affected member and you have a deferred pension, we will update our records so that the interim arrangement does not affect the calculation of your pension when you retire.
You can see copies of all member correspondence relating to the so-called ‘Rule 22 court case’ here.
Mercer has written to affected members about compensation to correct their historically lower pension payments. If you have received this letter, please continue to liaise with Mercer about it. If you think you may be an affected member but you haven’t received a letter from Mercer, please contact them, rather than our new administrator, XPS.