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Housing Provider Prevails in Chief Executive Pension Row

In a decision of interest to pension advisers and public employers, the High Court has ruled that a social housing provider which dispensed with its chief executive’s services did so because it was dissatisfied with his performance and not for reasons of business efficiency.

The provider, an arm’s length company which was wholly owned by a local authority, made a severance payment of more than £200,000 to the 52-year-old executive on his departure. However, it refused to grant him early retirement or to pay him a full pension.

He complained to a deputy pensions ombudsman, who found that he was entitled to be paid an unreduced pension by virtue of the Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations 2007. That was on the basis that the company had decided that he should leave his post in its own interest and on grounds of business efficiency.

In overturning that decision, the Court noted that the company’s sole shareholder, the local authority, had threatened to withdraw its funding if the executive was not replaced. The evidence was all one way that his employment was ended due to serious doubts about his personal performance. His departure was not required due to any systemic or structural change in the way the company ran its business and it could not sensibly be said that business efficiency was a primary ground for his removal.