In Brass Trustees Ltd v Goldstone, the High Court has approved a decision in January 2023 by the Biwater DB scheme trustee to issue petitions to wind up the scheme's sponsoring employers. The scheme's deficit was estimated to be £28.3m as at December 31, 2022.
The scheme's employers had failed to meet their financial obligations to the scheme and the trustee concluded that there were signs they would not be able to do so in the future. The trustee was concerned that this would result in "scheme drift" - the proportionate level of funding worsening over time and "PPF drift" - an increase in the amount of compensation payable by the PPF. Under the trust deed and rules, the trustee could only wind up the scheme without the principal employer's agreement on the employer's insolvency, and thus sought the Court's approval of its proposed winding up petitions.
The Court was satisfied that in arriving at its decision, the trustee had considered relevant factors including the financial circumstances of the scheme, the consequences for members if the scheme were to continue without winding up, and the trustee's duties to call in and protect scheme assets and to protect scheme members. In those circumstances, the Court was satisfied that the test for approval of the trustee's winding-up petitions had been met.
The trustee had concluded that its decision would have been the same whether or not it took into account the existence of the PPF. The judge commented that the trustee could not have sought to take advantage of the existence of the PPF to justify failing to take steps to prevent the scheme deficit (and drift) increasing further.
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