Pension Protection Fund · CAS-83901-H1T3

CAS-83901-H1T3

Ombudsman’s Determination Applicant Mr H

Scheme The Pension Protection Fund (the PPF)

Respondent The Board of the Pension Protection Fund (the Board)

Referral summary Mr H has referred an appeal of a decision that was issued by the Board’s Reconsideration Committee on 20 April 2021. Mr H’s referral is that the Board has not applied any annual increase to his PPF compensation which he is receiving in respect of service before 6 April 1997. Mr H says that this lack of indexation constitutes unlawful age discrimination, because it treats older members of the PPF less favourably than younger members.

Summary of the Deputy Pension Protection Fund Ombudsman’s Determination and reasons The Board is not required to take any action in respect of this referral, because the Reconsideration Committee reached its decision correctly in accordance with the current legislation, namely the Pensions Act 2004, which does not provide for increases to benefits accrued before 6 April 1997.

1 CAS-83901-H1T3 Detailed Determination Material facts

Relevant extracts from The Pensions Act 2004 (PA 04), are provided in the Appendix to this Determination.

Mr H was a member of the Sheffield Forgemasters Pension Scheme (the Scheme), and his pension in the Scheme commenced in June 1988. His pension in payment increased annually by the Retail Price Index up to a maximum of 3%.

The Scheme entered the PPF assessment period on 27 July 2005 and members of the Scheme transferred to the PPF on 18 March 2009. As at the Scheme assessment date, Mr H’s pension was £14,370.36 per annum, and he has continued to receive compensation from the PPF at that same rate since March 2009.

In or around 2020, Mr H complained to the Board that the amount of his PPF compensation has remained the same. believed that the legislation set by the Department for Work and Pensions (DWP) concerning indexation of PPF compensation for benefits accrued before 6 April 1997 constitutes age discrimination, and he asked the Board to change the law.

The Reconsideration Committee did not uphold Mr H’s complaint. In its decision dated 20 April 2021, the Committee explained that the Board must pay PPF compensation in line with the PPF governing legislation, the legislation does not allow for the payment of increases on benefits accrued before April 1997, nor for discretionary payments, and it does not have the power to change the law which can only be changed by Parliament.

Mr H referred the matter to The Pensions Ombudsman (TPO) following the Committee’s decision.

Summary of Mr H’s position

2 CAS-83901-H1T3 Summary of the Board’s position

1 Courts of Justice of the European Union Case C-17/17. 3 CAS-83901-H1T3

2 In Hughes it was decided that the PPF compensation cap, under paragraph 26 of Schedule 7 of PA 04, constituted unlawful age discrimination under the EU Charter and/or the general principles of EU law. 3 Charter of Fundamental Rights of the European Union. 4 CAS-83901-H1T3

Conclusions

I would firstly clarify that I do not have the jurisdiction to change legislation. Mr H’s referral concerns the Board’s determination of his entitlement under the compensation provisions of the PPF. This is a reviewable matter under paragraph 16 of Schedule 9 to PA 04. My jurisdiction in respect of a reviewable matter is to investigate and determine what (if any) is the appropriate action for the Board to take in relation to the matter. In particular, I have to determine whether the Board’s Reconsideration Committee reached its decision correctly. If I find that the Reconsideration Committee reached its decision correctly, I must determine that it is not appropriate for the Board to take any action in relation to the matter. If, on the other hand, I find that the Reconsideration Committee did not reach its decision correctly, I must determine what

5 CAS-83901-H1T3 action (if any) the Board should take in relation to the matter and remit the matter to the Board with directions for the purposes of giving effect to the determination4.

In its decision of 20 April 2021, the Committee explained that the Board must pay PPF compensation in accordance with the PPF governing legislation, the legislation does not allow for the payment of increases on benefits accrued before April 1997, nor for discretionary payments, and it does not have the power to change the law which can only be changed by Parliament.

The legislation was outlined in the Board’s formal response to Mr H’s referral to TPO. In summary, paragraph 28 of Schedule 7 of PA 04, provides for the indexation of post- 1997 service (defined in paragraph 28(6) of Schedule 7 as service accrued on or after 6 April 1997). There is no provision in PA 04 or in PPF regulations for the indexation of benefits incurred in respect of service before 6 April 1997. The Board has a discretion under paragraph 29 of Schedule 7 to apply a higher increase to PPF compensation, but only in respect of the “underlying rate”, which is restricted to pensionable service that occurred on or after 6 April 1997.

Given that Mr H alleges age discrimination, I have considered the extent to which the relevant provisions of PA 04 and the Compensation Regulations are overridden under retained EU Law or UK law (that is, the Equality Act and the Human Rights Act 1998) as a consequence of any applicable age discrimination requirements. The relevance of this assessment is that if the applicable legislation is overridden, the Reconsideration Committee is unlikely to have decided the reviewable matter correctly if it concluded that the Board had to pay benefits in accordance with the legislation governing the PPF. Whereas if the legislation is not overridden, the Reconsideration Committee would have reached its decision correctly in line with the legislation which does not provide for the indexation of benefits accrued pre-1997.

4 Section 213 of PA 04, Regulation 16 of the Pension Protection Fund (Reference of Reviewable Matters to the PPF Ombudsman) Regulations 2005 SI 2005/2024.

5 Section 214(2) of PA 04, Regulation 14 of the Pension Protection Fund (Investigation by PPF Ombudsman of Complaints of Maladministration) Regulations 2005 SI 2005/2025. 6 CAS-83901-H1T3 The Equality Act

I consider that section 29, ‘Provision of services, etc’, of Part 2 of Chapter 2, of the Equality Act is relevant in this case. Section 29 states that:

“(1) A person (a “service-provider”) concerned with the provision of a service to the public or a section of the public (for payment or not) must not discriminate against a person requiring the service by not providing the person with the service.

(2) A service-provider (A) must not, in providing the service, discriminate against a person (B)—

(a) as to the terms on which A provides the service to B;

(b) by terminating the provision of the service to B;

(c) by subjecting B to any other detriment.”

The complaint that a lack of indexation for benefits accrued pre-1997 amounts to age discrimination arguably falls under section 29(2)(a) and/or 29(2)(c), on the basis that the complaint concerns discrimination as to the terms of PPF compensation paid to Mr H and/or the subjecting of Mr H to financial detriment.

The Board relies on paragraph 2(6) of Schedule 36 and paragraph 1(1) of Schedule 227 of the Equality Act in its defence. Paragraph 2(6) states that:

“Section 29 does not apply to anything done in connection with the imposition of a requirement or condition which comes within Schedule 22 (statutory provisions).”

Paragraph 1(1) Schedule 22 states that: “A person (P) does not contravene a provision specified in the first column of the table, so far as relating to the protected characteristic specified in the second column in respect of that provision, if P does anything P must do pursuant to a requirement specified in the third column.”

Applying the columns of the table, this means that the Board does not contravene the relevant provisions of the Equality Act in respect of the protected characteristic of “age”, so far as the Board is acting pursuant to “a requirement of an enactment”. This exception is referred to in the Equality Act as statutory authority, and the relevant caselaw confirms that it is interpreted narrowly and applies to acts done in the necessary performance of an express obligation in an enactment. The exception does

6 ‘Services and public functions: exceptions’. 7 ‘Statutory provisions’.

7 CAS-83901-H1T3 not apply to acts done in the exercise of a power or discretion conferred by the enactment8.

It is my view that the Board’s actions in not increasing Mr H’s benefits accrued pre- 1997 have been carried out in accordance with a requirement of an enactment, that is section 162(1) of PA 04, which states that “Schedule 7 makes provision for compensation to be paid in relation to a scheme for which the Board assumes responsibility in accordance with this Chapter” and paragraph 28 schedule 7 of PA 04, which only provides for the indexation of benefits accrued post-1997. The Board has no discretion to apply increases to benefits accrued pre-1997.

Even if the Board’s actions were (at face value) discriminatory under section 29, as those actions were necessary to perform its express obligation under PA 04, the exception in paragraph 1 of Schedule 22 means that section 29 does not apply to them.

I therefore find that the PPF legislation governing the indexation of benefits is not overridden by section 29 of the Equality Act.

The Human Rights Act 1998

Although not expressly mentioned, Mr H’s broad submission could include an argument that the lack of indexation in PA 04 for pre-1997 accruals amounts to unlawful age discrimination and is incompatible with Mr H’s rights under the Convention on the Protection of Human Rights and Fundamental Freedoms (the Convention), such that a court could make a declaration of incompatibility under the Human Rights Act 1998 (HRA).

The power to make a declaration of incompatibility in relation to primary legislation, such as PA 04, is set out in section 49(1) and (2) of the HRA. Namely:

“(1) Subsection (2) applies in any proceedings in which a court determines whether a provision of primary legislation is compatible with a Convention right.

(2) If the court is satisfied that the provision is incompatible with a Convention right, it may make a declaration of that incompatibility.”

Section 4(5) defines “court” for these purposes, and neither I nor the Pension Protection Fund Ombudsman is covered by that definition. Therefore, I do not have the power to make a declaration of incompatibility in relation to PA 04.

If Mr H wished to pursue this argument, he would need to make a claim to one of the bodies listed in section 4(5), such as the High Court of England and Wales.

8 Hampson v DoE [1991] 1 AC 171 at 181, Ahmed v Amnesty UKEAT/0447/08. 9 ‘Declaration of incompatibility’. 8 CAS-83901-H1T3 EU Law

I also find that the indexation provisions of the PPF’s governing legislation are not overridden by the EU Charter (Article 21) and general principles of EU Law. I agree with the Board’s submission that further to the Withdrawal Act and the ET’s decision in Secretary of State v Beattie, Mr H cannot rely on the EU Charter, because:-

The legal basis supporting this view is correctly set out by the Board in its formal response to Mr H’s referral. In summary:-

“The Charter of Fundamental Rights is not part of domestic law on or after exit day”

“(1) There is no right of action in domestic law on or after exit day based on a failure to comply with any of the general principles of EU law. (2) No court or tribunal or other public authority may, on or after exit day— (a) disapply or quash any enactment or other rule of law, or (b) quash any conduct or otherwise decide that it is unlawful, because it is incompatible with any of the general principles of EU law.”

10 ‘Exceptions to savings and incorporation’. 11 ‘Further provision about exceptions to savings and incorporation’. 12 ‘Consequential, transitional, transitory and savings provision’. 9 CAS-83901-H1T3

Anthony Arter CBE

Deputy Pension Protection Fund Ombudsman 23 October 2023

Appendix

Extracts from the Pensions Act 2004

10 CAS-83901-H1T3

1. As relevant, Section 162 of Chp 3, Part 2, ‘The pension compensation provisions’, provides:

“(1) Schedule 7 makes provision for compensation to be paid in relation to a

scheme for which the Board assumes responsibility in accordance with this Chapter, including provision for—

(a) periodic compensation to be paid to or in respect of members,

(b) lump sum compensation to be paid to members,

(c) a cap to be imposed on the periodic compensation and lump sum compensation payable, and

(d) annual increases to be made to periodic compensation.”

2. As relevant, paragraph 28 of Schedule 7, ‘Annual increase in periodic compensation’, provides: “(1) This paragraph provides for the increases mentioned in sub-paragraph (3)(b)[13] of paragraphs 3[14]…

(2) Where a person is entitled to periodic compensation…, he is entitled, on the indexation date, to an increase under this paragraph of—

(a) the appropriate percentage of the amount of the underlying rate immediately before that date, …

(3) In sub-paragraph (2)—

“appropriate percentage” means the lesser of—

(a) the percentage increase in the general level of prices in Great Britain for the period of 12 months ending with the 31st May last falling before the indexation date, and

(b) 2.5%;

“indexation date” means—

13 Sub-paragraph 3(b) states: “any increases under paragraph 28 (annual increases in periodic compensation).”

14 Pensions in payment. 11 CAS-83901-H1T3 (a) the 1st January next falling after a person first becomes entitled to the periodic compensation, and

(b) each subsequent 1st January during his lifetime;

“underlying rate” means, in the case of periodic compensation under paragraph 3…, the aggregate of—

(a) so much of the amount mentioned in sub-paragraph (3)(a) of the paragraph in question as is attributable to post-1997 service, and

(b) the amount within sub-paragraph (3)(b) of that paragraph immediately before the indexation date. …

(3A) For the purposes of paragraph (a) of the definition of “appropriate percentage” in sub-paragraph (3), the Secretary of State may (from time to time) decide, as the Secretary of State thinks fit, the manner in which percentage increases in the general level of prices in Great Britain are to be determined.

(3B) The Secretary of State must publish any decision made under sub-paragraph (3A).

…”

12