Pension Funds

A common formula for Pension Funds is 1/60th of retiring salary for each years of service.

In Thrells Ltd (in liq) v Lomas [1993] 2 All ER 546 at 549 Sir Donald Nicholas V-C stated:

The rules before me are the rules with effect from 1 September 1977. They provide for a conventional final salary pension scheme offering 1/60th of retiring salary for each year of service………Most members paid 4% of their salaries towards the cost of providing the benefits. Directors and consultants were not required to contribute. The Employer was required to pay the balance“.

In Bridge Trustee Ltd v Houldsworth [2010] 4 All ER 1069 the Court of Appeal stated at 1093:

The scheme was established by interim deed dated 15 December 1971. It was a conventional final salary scheme. The members paid contributions of 5% of pensionable salary. They were to receive a pension at normal retirement dated of 1/60th of their pensionable salary for complete year of pensionable service. The participating employers paid the balance of the cost of providing those benefits.”

In Mettoy Pension Trustees Ltd v Evans [1991] 2 All ER 513 Warner J stated at 526:”

The main features of the 1973 scheme were to be, firstly that instead of being a “fixed accrual scheme”, providing at normal retirement age a pension of a fixed amount for each year of pensionable service, it should be a “final salary scheme” providing at that age a pension of one-sixtieth of final salary for each year of pensionable service, and secondly that members’ contributions, instead of being a fixed weekly amount, should be a percentage , 4% of their salaries, the employers’ contributions continuing to be of whatever amount was necessary to make up the cost of the benefits to be provided.

The contribution rates of members varies from fund to fund and has generally increased over time as have average life expectancies:

In 1936 the contributions of staff of the Bank of New South Wales, E.S. &A Bank and the Bank of Adelaide were 2.5% of salary with the Banks also contributing a notional 2.5%.

The staff of the Bank of Australasia paid 3.5% and the Bank 3.5%, however the maximum pension was 7/8ths of pensionable salary compared to the more common 2/3rd maxim

Members of the Elder Smith and Co Limited Provident and Guarantee Fund paid 2.5% from 1914 to 1938. In 1938 the rate was increased to 3.5% along with increased benefits.

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