British Airways loses high court battle over discretionary increase

23 May 2017

British Airways (BA) has lost a landmark trial to block its pension trustees' decision to award a discretionary increase in 2013.

Professional Pensions reports on the seven week battle towards the end of 2016, where the trustees of the Airways Pension Scheme (APS) were taken to the high court to defend a 0.2% discretionary increase - above the rate of the Consumer Prices Index (CPI) - to members in the 2013/14 year.

The decision had been made after the scheme was moved from the Retail Prices Index (RPI) in 2011 - as it was linked to the treasury's pension increase review orders - and a recovery plan had also been agreed based on RPI in 2010, and then again in 2013.

BA alleged the APS trustees did not have the power to award an increase, especially while the scheme was in deficit, had ignored advice and put pressure on advisers to change recommendations, and given "gratuitous" and "unearned" benefits.

However, in his 164-page judgement, (published 19 May), Justice Morgan said the APS trustees had not made a "benevolent or compassionate payment", had not committed an abuse of power, and had regard "to all relevant considerations and to no irrelevant considerations".

The judge ruled on both the trustees' decision to amend the scheme rules - using clause 18 which allowed rules to be amended "in any way" unilaterally - to grant themselves a unilateral power to award discretionary increases in 2011, and the eventual decision to give out a 0.2% increase in 2013.

The judge agreed the deficit and BA's positions were factors that needed to be taken into account during a decision-making process, but said trustees had adequately considered these. He disagreed with BA that both actions had been conducted improperly or were not allowed, thereby allowing the 0.2% increase to go ahead.