Court of Appeal to hear British Airways’ challenge against pension trustee powers
The Court of Appeal is gearing up hear the latest round of the bitter dispute between British Airways and its pension trustees over a new power granted by the trustees to award additional payments to staff.
The high-profile case centres on the switch of public sector pension increases from the Retail Price Index (RPI) to the Consumer Price Index (CPI), which is what had applied to members of BA’s Airways Pension Scheme (APS).
The changes caused a wave of protest among staff who said they had been promised RPI increases, which have typically been higher than those based on the CPI.
The legal wrangling dates back to 2013, when BA issued legal action against the trustees’ decision to amend the rules of the APS to introduce a new power allowing them to award discretionary increases to pensions.
Read more: British Airways is closing its final salary pension scheme
In November 2013, the trustees voted to grant a discretionary increase of 0.2 per cent, half the difference between RPI and CPI, costing BA £12m.
BA challenged the validity of the introduction of the new power but its case was dismissed by the High Court in May 2017, after the judge ruled the amendment was not an abuse of power.
The Court of Appeal will tomorrow hear BA’s appeal of last year’s decision.
A spokesperson for BA said: “Given the risks that remain within the scheme we believe the deficit contributions should be applied to improve funding and reduce risks, not improve benefits.
“There are 24,200 members in this pension scheme, 98 per cent of whom are already retired and on far more generous pensions than succeeding generations of British Airways employees. Last year British Airways made payments of more than £500m towards pension fund deficits.”
Stuart Pickford, head of pensions litigation at law firm Mayer Brown, said: “A key issue in this appeal is whether it was right for the trustees to grant higher increases in the face of opposition from BA. In other words, is it appropriate for trustees to take an active role in benefit design or should this be left to the employer which established the scheme?
“BA is expected to argue that the purpose of an occupational pension scheme is to give effect to the benefits package designed by the sponsoring employer who ultimately foots the bill and that it is not the role of the trustees to decide to change that package.
“This important appeal is likely to provide helpful guidance on what this means in practice – identifying precisely the purpose of a pension scheme is crucial to enabling trustees to exercise their powers properly.”
Read more: BA to save up to £80m every year with new flexible pensions scheme