FDR Ltd v Dutton: how pension increase underpins operate

On 29 March 2017 the Court of Appeal handed down judgment in the first reported case discussing how an underpin should operate in relation to increases to pensions in payment for an occupational pension scheme.

The underpin was required as a result of a deed of amendment which sought to change the rate at which pensions in payment were to be increased annually from 3% to 5%LPI, but which was invalid insofar as it purported to apply retrospectively. The Court of Appeal, reversing Asplin J at first instance, held that the underpin referable to the pre-amendment period should be applied cumulatively rather than annually. This decision may well have a significant financial impact on pension schemes which are required to operate pension increase underpins.

Of potentially wider significance was the application by the Court of Appeal of the principle of “minimum interference” in determining the application of the underpin, which may be a powerful new tool in the construction of pension scheme provisions more generally.

On 3rd May 2017, Paul Newman QC and Simon Atkinson, who appeared for the successful appellant, will be giving a concise and practical exposition of the case, its implications for the calculation of other pension increase underpins, and the “minimum interference” principle of construction endorsed by the Court.