Newell Trustees Ltd v Newell Rubbermaid UK Services Ltd – High Court approves DB to DC benefit conversion subject to underpin

On January 23, 2024, judgment was handed down in Newell Trustees Ltd v Newell Rubbermaid UK Services Ltd. The Court considered the validity of scheme changes converting members’ final salary benefits to money purchase benefits, following their transfer to a new DC section of the scheme in 1992.

The judgment considered several aspects of pensions law, including:

• The construction of interim deeds – the terms of the interim deed were found to be sufficiently certain that they would have been enforceable if the subsequent definitive deed had not been executed. The Court held that an interim deed does not need to include all substantive terms, as these can be introduced and finalised later once the definitive deed is prepared and executed.
• The validity of extrinsic contracts - those members aged 40-44 who chose to transfer to the DC section were bound by the extrinsic contract which arose between them and the employer.
• The construction of Courage provisos – the scheme rules in the transferring scheme included a proviso that no amendments should prejudice or impair accrued benefits. The Court considered whether the proviso prohibited the conversion of DB to DC benefits and concluded that it did not, so long as the final salary link was preserved.
• The calculation of the applicable final salary underpin – the Court found that it was inevitable that some sort of final salary underpin would need to be applied to the converted benefits. Where the transfer sum would have been higher taking into account salary increases and final pensionable salary, augmentation and interest applied.

The judgment also considered, and rejected, a claim that the method by which members were selected for the transfer and conversion process constituted unlawful age discrimination. Members under the age of 40 were transferred to the DC section automatically, members aged 40-44 were given the choice to stay in the DB section or to transfer, and members over age 45 remained in the DB section. The Court found that the decision to split the members into groups according to age had been taken in 1992 before age discrimination was unlawful, and there was no rule in the current scheme provisions in conflict with the non-discrimination rule implied into schemes under the Equality Act 2010.

Thus, the employer enjoyed a comprehensive victory. The judge sympathised with the representative beneficiary but as it was more than 30 years since the transfer and no objections had been raised at the relevant time, he saw the insistence on pursuing all possible objections to its validity now as part of preparation for a scheme buy-out as “somewhat opportunistic”.

Read the judgment.