There is a perception that as the Pensions Schemes Act 1993 and the Pensions Act 1995 mature, pensions disputes are on the rise. The conflicts can flare up between trustees, between trustees and employers, between members and trustees or employers, or between trustees or employers and professional advisers (for example, investment managers, actuaries, accountants, insurers, and lawyers). These disputes can be large in quantum, given the size of some pension funds in the U.K., equally they can be quite small if concerned with the entitlement of an individual with little service under a scheme. Nevertheless, all disputes require an understanding of the complex workings of pension schemes and often involve highly confidential and personal information (for example, incapacity qualification disputes).
The High Court and the Pensions Ombudsman are the tribunals that first come to mind for dealing with this range of disputes, but they only represent the limited range of official channels. There are other ways of resolving disputes that should be considered by all involved, since they can reduce the disruption and cost experienced by pension schemes.
The ‘other ways’ to resolve disputes, including pensions disputes, are alternative dispute resolution or ADR. This is a relatively new trend in the U.K., spurred on by Lord Woolf’s recent reforms of the rules of civil litigation. Those rules now provide strong incentives, in the form of costs awards, for the parties to attempt ADR before coming to the High Court. The existence of the Pensions Ombudsman and the provisions of the Pensions Act 1995 which require internal dispute resolution processes are also forms of ADR.
Common forms of ADR are arbitration and mediation. Both are consensual and involve a ‘neutral’ person in the dispute; however, in arbitration the neutral will make a decision and in mediation the neutral will only help the parties make their own decision. These processes can be extremely effective in resolving pensions disputes and help avoid some of the problems associated with more formal litigation. Among their benefits, there is no need to wait for a dispute to arise to preplan the use of ADR processes. Furthermore, ADR can be decided or assisted by a person knowledgeable in pensions; they can reduce costs and delay; they can assist the parties in maintaining their relationship; and finally they are usually confidential.
Whether a form of ADR is appropriate for a pension dispute must be assessed in the context of particular circumstances. However, the advantages of ADR should be considered in each case. Parties involved with a pension scheme would do well to make full use of the internal dispute resolution mechanisms available and consider the benefits of mechanisms intended to divert more disputes from formal channels. Trustees usually have the power to settle or compromise disputes and are thus not prevented from involvement in ADR. The sooner a dispute is recognised and addressed, the better.
Of course, communication, transparency and other best practices are effective tools in the prevention of disputes, but will not achieve complete success: alternative dispute resolution processes are important tools to be aware of in managing disputes quickly, efficiently and fairly. Given the vast array of pension disputes that can arise, it is only fitting that there should be a comparably broad range of resolution processes to help address them.
Cynthia Crysler
Cynthia has recently joined our Pensions Litigation team to concentrate on litigation and dispute resolution. Her arrival helps consolidate Hammond Suddards' considerable expertise in these areas. Cynthia qualified as a barrister and solicitor in Ontario, Canada. Following her training she remained with one of Canada's national firms as a specialist pensions litigator for three years post-qualification. Cynthia has recently completed a Masters degree in Law (LLM) at University College, London.
The information and opinions contained in this article are provided by Hammond Suddards. They should not be applied to any particular set of facts without appropriate legal or other professional advice.
For further information please contact Andrew Ashley-Taylor ( Pensions), Catherine McKenna (Pensions) or Jane Marshall (Pensions).
