Failure to comply with terms to improve benefits of final salary pension scheme as they are set out in scheme rules could lead to members losing out on benefits they believed they were entitled to, warns the pensions team at City law firm, Wedlake Bell.

A recent High Court decision ruled that amendments to member benefits made since 1981 to the Yorkshire Chemicals Pension Scheme, which saw improvements made to benefits, were invalid because the procedures to do so were not strictly stuck to.

The law firm explained that trustees of the scheme were required to obtain a written actuarial opinion before making amendments to the benefits - since this had not been followed, the Court ruled that the majority of benefit changes going back as far as 1982 were invalid, and member benefits were reduced, along with compensation from the Pension Protection Fund (PPF).

"This case is particularly important because amendments are going to be increasingly challenged by the Pension Protection Fund (PPF) as more and more schemes fall under its umbrella," commented Clive Weber, partner and head of the pensions team at Wedlake Bell.

"With more and more companies becoming insolvent because of the financial crisis, the PPF is expected to have to step in more frequently to rescue pension funds.

"To ensure its funds are not depleted the PPF will try to limit its obligations to pay compensation for members' benefits. This High Court decision will encourage the PPF to challenge changes to benefits if the scheme amendment power has not been followed to the letter."

Weber said that this was in addition to the PPF's statutory duty to ignore certain types of scheme alterations, which includes changes made within the three years prior to the pension scheme's referral to the PPF.

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