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Travers Smith helps Stena Line achieve landmark ruling in Merchant Navy Ratings Pension Fund litigation

Tuesday, 16 January 2018
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Wednesday, 25 February 2015

The High Court has today ruled that the trustee of the Merchant Navy Ratings Pension Fund can implement its proposed new funding regime requiring former employers to contribute towards the deficit.

The old funding regime, which was put in place when the Fund was closed in 2001, required only current employers to fund the deficit.  Stena Lina is the biggest current employer and has been paying 60% of the deficit contributions.

The High Court's ruling means that former employers will now be called upon to make good their share of the overall deficit.  Each current or former employer's share will be based on the value of benefits earned by members whilst in pensionable service with that employer.  Adjustments will be made on account of employers that no longer exist or are unable to pay their full share.

The High Court also ruled that the new funding regime can properly give current employers credit for the deficit contributions they have paid in the past.

The new funding regime will therefore reduce the funding burden on Stena Line and other current employers.

In 2010, Stena Line obtained a High Court ruling that the MNRPF rules give the trustee power to require former employers to pay contributions.  That ruling was upheld by the Court of Appeal in 2011.  The ruling today confirms that it is a proper use of that power for the trustee to introduce the new funding regime. 

Travers Smith acted for Stena Line in all these proceedings.  The Travers Smith team was led by Paul Stannard, Head of Pensions, and Mark Hall, Senior Counsel Dispute Resolution.  They instructed Brian Green QC and Jonathan Hilliard, both of Wilberforce Chambers.

Frozen scheme question

The High Court today also ruled that, as contended by Stena Line, the MNRPF became a "frozen scheme" when all members stopped accruing pensionable service in 2001, even though some members continued to enjoy a higher rate of revaluation of their accrued pensions whilst they remained in relevant employment.  This affects the question of which employers have statutory funding obligations and when statutory debts are triggered under s. 75 of the Pensions Act 1995. 

The question of what counts as pensionable service for statutory purposes has been debated by lawyers for almost 20 years.  This judgment will be of interest to other pension schemes which, for example, have terminated pension accrual but retain a final salary link for members who remain in the sponsor's employment.

Paul Stannard said:  "We are very pleased that the High Court has approved the funding regime proposed by the MNRPF trustee.  This is a good outcome for Stena Line and other current employers.  They have been funding the deficit even though two-thirds of the deficit relates to benefits from service with former employers. 

This is also a good outcome for the MNRPF and its 30,000 members, who will now have stronger support from the UK shipping industry.

Our Counsel, Brian Green QC and Jonathan Hilliard, were steeped in the history of the MNRPF and the way pensions legislation has developed over the decades.  Their skilful presentation of often very technical arguments helped to ensure success for Stena Line on all points.

In her judgment, Mrs Justice Asplin gave useful guidance for trustees making decisions about the funding of pension schemes.  Trustees must make decisions which aim to ensure that members are paid their promised benefits.  But they are not normally obliged to set risk-free funding targets or to require each employer to pay the most that it can afford.  The interests of the employers can be relevant factors to take into account when deciding on a particular funding regime.

The "frozen scheme" question had been untested for nearly two decades.  This case will be studied by trustees and employers of schemes where service is no longer pensionable but accrued benefits for those still in employment remain linked to future pay."  

Mark Hall said: "Today's judgment is the culmination of over 6 years' work by the Travers Smith team on behalf of Stena Line and the other current employers.  I am delighted that we have been able to bring this hard-fought litigation to a successful conclusion."


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