The trustees of an Irish pension scheme operated by packaging group Amcor are challenging the company’s decision to end contributions to the plan in the courts.
In May last year, the group told Amcor Pension Trust (Ireland) Company that it was immediately terminating further contributions to the fund, which provides incomes to 69 pensioners and has 66 deferred members, that is, former workers yet to retire and draw pensions.
The trustees this month went to the High Court to ask if the company should have given notice of its intention to stop contributing to the fund, and if so, what the duration should be.
Amcor maintains that a clause in the trust deeds that created the scheme allowed it to end contributions to the fund, which it recommended be wound up and replaced with new payments to the beneficiaries.
Mr Justice Denis McDonald reserved judgment on the issue after hearing both sides in the Commercial Court last week.
[ Workers averse to taking risk in growing pension funds - surveyOpens in new window ]
Justice McDonald acknowledged that the case posed an important legal question for many pension trustees, but advised the pair that settling the dispute would be a better solution.
He pointed out that it would take several months for him to rule, while his finding was bound to be appealed, drawing out the litigation even further.
The trustees’ senior counsel, Kelley Smith, told the court that by the end of last year, the fund’s pensioners were receiving an average of €12,254 a year. Payments increase at either 5 per cent or consumer price inflation, whichever is the lesser.
It was originally a defined-benefit scheme, which promises beneficiaries a pension tied to their income on retirement, operated by Amcor Flexibles.
The current employer took over in 2011. The scheme had been restructured in 2008, when Amcor agreed to continue paying into the fund. It was closed to new members in 2010, so there are no workers currently paying into the plan.
Ms Smith told the court that Amcor’s notice that it was ending contributions immediately “came out of the blue” on May 26th last year.
[ Retire at 67 for a higher pension? New regime begins in JanuaryOpens in new window ]
[ Indexing pension cap would ease recruitment headache for top public postsOpens in new window ]
Amcor relied on a clause stating that the “employer may, at any time, by notice in writing to the trustees, terminate its liability to pay contributions to the fund”. The company argues that “at any time” means immediately.
The company stated that the scheme’s funds had improved significantly so it was appropriate to wind it up and distribute the proceeds, as this would give members a reasonable outcome.
Amcor offered a once-off €250,000 payment on condition that the trustees pledged to ensure that the payments replacing members’ pensions would increase at a fixed-rate rather than be tied to inflation.
However, the trustees estimated that buying out the fund could cost €8.9 million while calculations of the deficit were €5.9 million.
Notwithstanding what the termination clause said, they argued that by halting contributions without notice, the company breached a basic duty to act in good faith.
Amcor’s senior counsel, James Doherty, said the company “strongly disagreed” with that point and had carefully explained to the trustees the basis for its decision.
Mr Doherty noted that submissions to the court explained in detail why there were different views of the scheme’s funding and on the most appropriate way to secure benefits for the workers, including that the buyout value was based on an “absolute worst-case scenario”.
The lawyer told the court that the termination clause was meant to give the company the right to halt contributions without giving notice.
He added that to decide that, because of funding obligations or some other issue, there could never be a no-notice termination, would be inconsistent with this.
