Employers with defined benefit schemes in TPT Retirement Solutions could be on the hook for more than £233m of extra liabilities, depending on a court verdict on whether benefits were changed correctly more than 10 years ago.  

 

TPT’s trustees were advised by counsel to seek clarification from the court after they found uncertainty about whether in 2011 they were right to change the uprating for pensions from the retail to the consumer price index for pre-2003 service. Further issues were then identified with pension increases in payment applied to benefits earned before December 2003 that TPT now also wants clarity on.  

 

Should the court rule that the trustees did not have the power to make the changes, about 1,500 active employers would be obliged to fund millions in extra liabilities. The individual impact will depend on what proportion of benefits were earned before 2003, but mallowstreet understands that for the Social Housing Pension Scheme alone, it would amount to £233m.

 

TPT has contacted all potentially impacted employers and shared draft court papers as part of a consultation process. 

 

A TPT spokesperson said on behalf of the trustees that “if there is an increase in liabilities which require additional contributions, these obligations must be met by the employer”. 

 

The total potential additional liabilities arising from all issues now identified have been estimated at around 3.9% of the total liabilities, according to consultancy First Actuarial. The largest affected scheme is the SHPS. Other schemes that could be hit are single-employer schemes created by a bulk transfer from SHPS, the Scottish Housing Associations’ Pension Scheme, the Independent Schools’ Pension Scheme and the Growth Plan. 

 

In a briefing about SHPS, First Actuarial notes that TPT has not incorporated the indexation issue – which accounts for at least £150m of the potential extra liabilities – in its financial tools and statements, “quoting the uncertainty of the outcome of court proceedings and difficulties in allocating liabilities for members with split-service across different employers”, showing the difficulties of distributing extra liabilities on different employers. 

 

The SHPS and SHAPS employer committees both told mallowstreet that “TPT has kept us fully informed on the legal process relating to changes to our scheme”, declining to comment further until court proceedings have concluded. 

 

Employers could be understandably dissatisfied if the outcome is negative for them. If the court decides that benefits were changed wrongly, one particular issue that could arise is whether any advisers would face a claim.

Such claims are not unusual; Aon was in the news last year following an accusation of negligence by Punter Southall Governance Services Trust Corporation. In December, Mercer was in court after Honda and its trustees alleged that it failed to advise competently on benefits changes. 

 

     

The spokesperson for TPT said the provider “has had a number of advisers during the period” in which the benefits changes were made. For the court case, it uses law firm Linklaters alongside leading and junior counsel. 

 

Asked if TPT would consider bringing a negligence claim against any advisers if the court decides benefit changes were erroneous, the spokesperson said: “Our focus is on securing a positive outcome from the court.” 

 

 

Law firm Trowers & Hamlins says the power of amendment in the governing documents contains a “fetter” that prevents changes which would “diminish or prejudicially affect the rights of any person in receipt of a pension or otherwise interest in the assets of the fund”.  

 

The question is if the fetter prevents benefits from being changed in ways in which the trustees have. Trowers & Hamlins says the amendments broadly affected include:  

 

 

Proceedings and a judgment are expected to complete in the second half of 2024.