Simplifying the defence of loss of pension claims

Recently we have taken over several personal injury claims in the advanced stages of litigation where claimants have pleaded, by way of lengthy expert pension reports, substantial future loss of pension income on ‘defined contribution: money purchase schemes’ (i.e. those most commonly held by employed or self-employed claimants who do not have access to a ‘defined benefit scheme’ such as a final salary scheme).

In one example, both parties had already spent around £20,000 each in experts’ fees on the issue. However, through the application of simple accounting principles, the costs of expert evidence should be entirely unnecessary.

We will refer to the basis of these inflated claims as the ‘theoretical approach’.

Theoretical approach

Broadly, the claimant will start by projecting the growth rates of a larger ‘but for’ pension pot as against a smaller ‘residual’ post-accident pension pot available at retirement. They will then calculate a ‘but for’ and ‘residual’ pension income by applying a hypothetical future annuity rate to the pension pots. In some instances the retirement date for calculation purposes can be decades away.

This approach tends to result in considerably inflated but ultimately unsustainable claims that can act as a barrier to settlement. It also leads to wasted time and costs, from experts and their instructing lawyers using the wrong methodology.


It is important to understand that the same, or an equivalent, money purchase pension scheme can be contributed to following the resolution of a claim.

Workplace money purchase schemes (i.e. where an employer contributes a set amount in addition to the claimant, usually a percentage of salary)

The claimant’s contributions can still be paid from damages for loss of earnings, so any loss will be restricted to the amount of lost employer contributions but for the accident. The level of employer contributions can easily be confirmed through payslips. The gross annual value of the lost employer contribution is simply multiplied by the working life multiplier to give a lump sum amount. Any promotion prospects beyond a baseline income can also be factored in.

Individual money purchase schemes (i.e. with no contribution from an employer and usually held by the self-employed)

The claimant would have used a portion of his income to contribute to the scheme and therefore any payments, which would have been made ‘but for’ the accident, can still be made from the damages received for loss of earnings. Essentially, no loss of pension needs to be calculated.

Lessons learned

In the majority of cases, where an alleged pension loss is predominantly or entirely made up of money purchase scheme(s), a simple calculation should suffice without the need for expert input. Proactive road-mapping of a case should flag when the opposing team is considering retention of forensic accountancy expertise to calculate the loss of pension claim.

The above discussions  provides a useful template of the reasons for opposing external expertise, so that the defendant can put down appropriate costs markers for later reliance when costs are assessed. If this continues to be strongly disputed by a particularly dogmatic opposing party, in particular when seeking directions or by application, then obtaining a short letter from a forensic accountant vouching for the method of calculation should help to persuade the court that formal evidence is unnecessary and disproportionate.

Related item: Relief at source and in-specie pension contributions