Pensions speedbrief — scheme closures and benefit changes: High Court sheds light on some dos and don’ts

The High Court, in IBM UK v Dalgleish & others, found that an employer had breached its implied duty of good faith in the way it went about closing its defined-benefit (DB) schemes to the future accrual of benefits. This speedbrief looks at the case and its practical implications for employers and trustees who are considering (or have previously carried out) DB benefit change exercises.

This significant case was heard by Mr Justice Warren, who himself describes the judgment as ‘stupendously long’ — it weighs in at 434 pages. The facts are very complicated and involve more than 5,000 members spread over two schemes and various benefit structures.

In summary, IBM decided to make a range of changes to two of its DB schemes between 2009 and 2011. This was known as ‘Project Waltz’ and involved closure to the future accrual of benefits, imposing new early retirement terms and withholding pay rises from DB scheme members who did not agree to break the link between DB pension accrual and final salary…

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