Amending pension scheme benefits by extrinsic contract

In 2009 the High Court gave judgment in relation to the IMG Pension Plan, in a case concerning
amendments intended to change defined benefit (DB) benefits to defined contribution (DC) benefits for
both past and future service. The judgment is important because:

  • The scheme had a restrictive amendment power – which the court held could not be removed
    by a subsequent amendment.
  • It followed the decision in Re Courage Group's Pension Schemes and held that the restriction
    in the amendment power protected final salary linkage, despite argument that Courage had
    been wrongly decided.
  • The Court decided that contracts outside the scheme could not be used to get around the
    restriction in the amendment power. In doing so, it limited the circumstances in which such
    extrinsic contracts can be relied on – important as extrinsic contracts have become an
    increasingly popular device to effect benefit changes (following South West Trains – see box
    below). This part of the decision was followed by the High Court in BBC v Bradbury in 2012,
    which confirmed that extrinsic contracts can still be used provided the agreement concerns
    matters which fall outside the trust deed and rules.

Read the full briefing note: 'Amending pension scheme benefits by extrinsic contract'

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