In a previous blog post we discussed the impacts of the IBM case and following on from this, the first case where an Ombudsman complainant has sought to rely on the decision in IBM is considered below.
The Deputy Pensions Ombudsman has distinguished in the case of Thomson (PO-1293) from IBM and held that an employer expressing the intention to continue to grant annual discretionary pension increases was insufficient to create a ‘reasonable expectation” amongst members in relation to the employer’s duty of good faith in the exercise of discretionary powers under a pension scheme.
The complainant, Mr Thomson, was a pensioner member of the GE Pension Plan (the Plan), alongside a further top-up arrangement, the GE Supplementary Pension Scheme (the Scheme). The Plan rules stated that: “if the Principal Employer agrees, the Trustee may make increases to all or some of the pensions” in respect of pre 5 April 1997 service and that increases “must be reviewed by the principal employer at least once a year”.
The Scheme rules stated that “if the Trustees so agree, the Principal Employer may make increases to all or some of the pensions …”
Up to 2009 inflation-related increases on pre-1997 service were given each year. Much to the members’ disappointment, from 2010 onwards, no such increases were made.
Mr Thomson applied to the Pensions Ombudsman, with the view that the continued practice of applying yearly increases until 2010 created a ‘reasonable expectation’ among members that this would remain the case. He also argued that the company had given assurances to this effect at member meetings in 2002. Contrary to this, the company submitted that it had no record of such meetings, nor of ever giving any assurances that increases would continue.
The Deputy Ombudsman dismissed the complaint as the decision in IBM did not support the position that past practice was enough to give members ‘reasonable expectations’ that a discretionary benefit would continue to be awarded. In IBM, it was held that members had been given information which led them reasonably to believe that certain benefits would continue to be provided going forward.
Unfortunately for Mr Thomson, he had not provided sufficient evidence that this was the case, including any proof that the 2002 meetings took place, making it difficult to judge if statements amounted to a promise or were merely statements of intention. The Judge in IBM, Mr Justice Warren, stated in IBM that “… a statement of intention, if that is all that is established, cannot be treated as a commitment, promise or guarantee“.
Prospective complainants will need to be able to show more than a mere statement of intention in order to be able to claim that ‘reasonable expectations’ had arisen in similar circumstances.