tips

A guest blog from a litigation expert

As Gilbert and Sullivan wrote, things are seldom what they seem. When dealing with complex issues it can be difficult to know what’s really going on.  This can be especially true when you rely on others to do things for you.  How confident are you that your pension scheme’s governing documents reflect the intentions of all parties?

If a mistake has been made in a deed governing a trust based pension scheme, members could be entitled to higher benefits than they are actually receiving, if the scheme is being administered on the basis of what was intended rather than what the deed says.  However, putting matters right is rarely as easy as making a simple amendment to the deed so that it reflects those true intentions.  Legislation and caselaw combine to mean that in such circumstances, subject to other, relevant considerations, a court order should be sought, enabling the deed to be rectified so as to reflect the actual intentions of the employer and trustees when the deed was originally executed. If rectification is granted, the deed will be amended retrospectively.

However, success in a rectification claim is not automatic.  For rectification to be granted:

  1. the deed must fail to express the true intentions of the employer and the trustees;
  2. the mistake must be one that cannot easily be corrected in any other way;
  3. evidence will be needed in the form of witness statements and extensive supporting documentation;
  4. act quickly – any unreasonable delay can jeopardise a rectification claim.

The cost of bringing a rectification claim can be significant, but obviously such costs may be lower than the increase in benefits resulting from the mistake.  If the mistake occurred as a result of the negligence of a professional adviser, separate proceedings may be brought against them, seeking to recover the costs incurred.

As soon as you discover a mistake in your pension scheme’s governing documentation, seek legal advice.  It is vital that you preserve all relevant documentary evidence of the employer’s and the trustees’ original intentions when executing the document.

Top tips for employers and scheme trustees to avoid mistakes:

  1. Thoroughly document the decision to amend your scheme’s governing documents in both trustee and company board minutes.
  2. Give clear, written instructions to the adviser who is making the amendments. Keep copies of these and any other correspondence concerning the amendments.
  3. Keep copies of each draft of the document.
  4. Ensure that amendments are made without avoidable delay.
  5. Read the amended document carefully before it is executed; do not presume your instructions have been followed.

Instruct scheme advisers to carry out regular, comprehensive reviews of your scheme’s documentation.

This post was contributed by Thea Maertens. For more information, email blogs@gateleyuk.com.


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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.