Final salary schemes gripped by funding shortfalls could have a reprieve in the form of a ruling in Scotland that could save employers from having to pay millions in contributions to pension schemes, says law firm McGrigors.

The commercial firm said the ruling means that Scottish employers who equalised the retirement age of their employees at 65 years old may not have to top up their pension schemes - even if the equalisation process did not keep strictly to the law. Following an EU ruling, retirement ages had to be equalised and the majority of schemes opted to equalise it at 65 for both men and women.

With many employers in the UK having been required to top up schemes as they have failed to implement the equalisation process properly, McGrigors said the judgment could have major ramifications. However, the English courts have ruled that many employers did not carry out the equalisation process correctly, forcing them to pay out millions to ensure pension schemes were sufficiently funded so members could receive equal benefits from a lower age.

"This ruling may well help many employers who now may not have to provide additional unexpected benefits," commented Ian Gordon, partner at McGrigors. "For many sponsors of final salary schemes this will be a welcome reprieve.

"The English courts have held that unless employers undertook equalisation according to the very strictest letter of the law, which many did not, then the process was not valid. This has meant that many schemes have had to be topped up."

Gordon said the Scottish court ruled that there is no need to be "unduly technical or restrictive when considering what amounts to the valid exercise of an amendment power". The amendment in this case was authorised by a board meeting.

"Employers with pension schemes in England and Wales will be hoping that their Courts will look to this judgement when considering future cases concerning equalisation," he concluded.

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