insight - Burges Salmon

Sector work featured in this annual review 2012:ENERGYTRANSPORTFOOD, FARMING & LANDREAL ESTATEFINANCIAL SERVICESAEROSPACE & DEFENCESPORTHOTELS & LEISUREINDUSTRIAL & CHEMICALRETAILClearing a legal hurdleIn last year’s Insight we featured news of the substantial£95 million cash and security package which BurgesSalmon helped to secure on behalf of members of theGreat Lakes pension plan, in what was described as thekey regulatory success of 2011.In 2012, we continue to advise on a number of significantcases, including that which has seen the trustees of theQinetiQ Pension Scheme exercising their right to switchthe index they use to calculate future pension increases.This has enabled the employer – defence, aerospace andsecurity expert QinetiQ – to reduce its pension deficit bymore than £100m and improve the security of the scheme.Specifically, the trustees negotiated a funding and securitydeal for the pension scheme which necessitated a switchfrom the Retail Price Index (RPI) to the Consumer PriceIndex (CPI) as the main measure for evaluating pensionincreases in line with the cost of living. There was muchlegal debate over whether the switch from RPI to thenormally lower CPI for all service would breach section 67of the Pensions Act, which prevents changes to a pensionscheme which might adversely affect a member’s accruedrights or entitlement.An application to court was therefore required to validatethe proposed switch. With specialist advice from theBurges Salmon team, led by partners Tim Illston and JustinBriggs and supported by associates Helen Trethewey andTrilby James, the High Court agreed with Burges Salmon’sinterpretation that this switch to CPI would not breach s.67.While the switch will mean the overall pension provisioncould be lower, it will provide long-term security. Helping toclarify this legal hurdle will also provide other schemes withan alternative option, where employers and trustees havebeen struggling to reach satisfactory agreement.Throughout this process we have been focused on improving the scheme’s funding positionand the security of benefits accrued within the scheme. This court ruling has been a positivestep in this process.A spokesperson for QinetiQ’s Pension FundINSIGHT Burges Salmon Annual Review 2012 21