A memorandum of understanding has been signed by John Menzies and trustees of its pension scheme as it has closed the scheme and plans to begin a sectionalisation process, but experts have highlighted that this sort of agreement is rarely legally binding.

Rosalind Connor commented that a memorandum of understanding is usually a non-contractual agreement that the parties intend to do something.
“They are used increasingly in pension scheme situations as trustees and employers build relationships and trust, but know that actually the things they propose to do will take a long time,” she explained.

Rosalind also noted that generally, the memorandum allows the trustees and employer to spend the time and costs working towards a goal with the confidence that they agree on what they want to do. In this case, the goal is sectionalisation.

The agreement gives the parties certainty, “without everything having to be finalised”, said Rosalind. However, “technically it is rarely legally binding, so in fact either party could back out”.

In practice, this would have the potential to damage the relationship between the trustees and the employer, “but it is always possible”, she said.
Rosalind also highlighted that “the devil is often in the detail – it is always possible to have a [memorandum] where both parties think they are agreeing the same thing, but the details may be very different”.

Read the full article in Pensions Expert here.