Case law – Flexible retirement

Final salary pension schemes could be more inclined to offer employees flexible retirement following a Court of Appeal ruling (Trustee Solutions Ltd and others v Dubery and another) affecting plans that started the winding up process between 6 April 1997 and 6 April 2005.

Leslie Dubery was employed between 1992 and 2000 and was 64 years old when his employer went into liquidation resulting in the final salary pension scheme being wound up in 2002.

The Dubery case focused on how the scheme should distribute assets during the wind up process following the order set out in the Pensions Act 1995, which stated that the benefits of members where entitlement to payment of a pension has arisen are of a higher priority than those benefits earned but not yet paid.

The scheme, the trustees of which were Trustee Solutions, provided for a normal retirement date at 65 years for a male and 60 years for a female up until 1990 when the European Court in Barber held that such provisions in pensions generally amounted to sex discrimination.

In determining how assets were to be distributed in the Dubery case, the High Court decided that where any part of the pension had a retirement age of 60 years, all the pension must be paid to the member at the same time.

However, the Court of Appeal has overturned this judgment, deciding that the pension in this case should effectively be split into two – that which accrued with a normal pension age of 60 years to be payable from age 60 years, and part with a normal pension age of 65 years to be payable from 65 years.

Fraser Sparks, pensions solicitor at Hammonds, said that this case could prompt employers to pay greater regard to flexible retirement.

He said: “This is another reason why employers might want to look at flexible retirement and allow people to take tranches of benefits at different times and also why they are still in work.”