Pensions in 30: 18. Employer's duty of good faith

The Month in Pensions - Gowling WLG

Key points

• The Imperial case (Imperial Group Pension Trust Ltd. v. Imperial Tobacco Ltd. [1991] 1 W.L.R. 589) established that an employer owes a duty to pension scheme members (including employees, former employees and dependants of members) when exercising its powers under the scheme.
• Summarised, the employer's duty is not, without reasonable or proper cause, to act in a way calculated or likely to destroy or damage the relationship of trust and confidence between employer and scheme member.
• For the employer to have acted in breach of duty, it needs to be shown that it acted irrationally or perversely, in a way in which no reasonable employer acting in good faith would. Although it is entitled to take into account its own interests in deciding what to do, those interests need to be weighed against any reasonable expectations which employers had created.
• The IBM case (IBM (UK) Holdings Ltd v Dalgleish [2014] EWHC 980 (Ch)) has recently considered this area.

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