Recently, the Pensions Ombudsman in the case of MD et al (CAS 27382-Q6L3) dismissed a complaint filed by pre-2002 members of a DB pension plan who were not satisfied with the trustee‘s decision to change their plan benefit accrual rate from 1/60 to 1/70, in line with post-2002 members.

Although the ombudsman understood the frustration of the members, he did not accept the complaint.

Basically, the ombudsman said it was not for him to decide whether the trustee’s decision was the right one. The trustee had a wide discretion and the question the mediator had to ask himself was whether the trustee had made his decision by following a reasonable decision-making process in accordance with the famous Edge principles (arising from the Edge v Pensions Ombudsman case). [1999] EWCA Civ 2013), namely:

• Did the trustee conduct himself correctly in law?
• Did the trustee consider all relevant but irrelevant factors?
• Did the trustee ask himself the right questions?
• Did the trustee make a decision that was not perverse?

The Ombudsman’s arbitrator was satisfied in all respects. First, the trustee had correctly oriented himself in law from both a statutory and a plan rules perspective by (i) ensuring that the accrual rate of 1/60 still applies to all candidate member benefits accrued prior to the change in accordance with Section 67. of the Pensions Act 1995 and (ii) seek actuarial advice prior to exercising its amendment power as required by the rules of the scheme.

Second, the trustee had considered all the relevant factors. The Trustee provided the minutes of the meetings and it was clear that he had discussed all of the suggestions and comments raised during the consultation. The trustee had given no weight to irrelevant factors. Indeed, the Trustee had made it clear that his decision was to remedy the inconsistency between the contributions paid and the benefits received by the various members, and to ensure that the contributions were affordable.

Third, the Mediator was convinced that the trustee had asked the right questions. He had first considered many options and then sought comments on the option he deemed most appropriate in a consultation.

Fourth, the ombudsman was convinced that the trustee had not made a perverse decision; that is, a decision that no reasonable decision maker would make in the circumstances. The evidence indicated that the Trustee had considered the advice and comments.

Ultimately, the Ombudsman concluded that the decision-making process met the criteria of the Edge Principles.

This case shows the importance of following an appropriate decision-making process and the importance for directors to thoroughly document their process by keeping minutes of all relevant meetings and records of any assessment, consultation or communication to members. . At one of his meetings, the Director had received training on the appropriate decision-making process. Since the ombudsman’s decision was ultimately based on an assessment of the trustee’s decision-making process, all of this provided invaluable evidence in favor of the trustee.

On the one hand, then, this case demonstrates the difficulty of overturning a trustee’s decision, on the other hand, it is a clear reminder to trustees that they must have a solid decision-making process in place, especially when this is the most complex. discretionary decisions that affect member benefits.

As pension lawyers, we are often asked to advise on such decisions. If you have any questions about decision making or any of the topics covered in this article, please contact your usual Burges Salmon contact.

It is not for me to decide whether the trustee’s decision is the right one. The trustee has a wide discretion in the exercise of his powers. The question I have considered is whether the trustee made his decision following a reasonable decision-making process. Anthony Arter, pension mediator, March 17, 2021