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A decision by the High Court in the Imperial Home Décor case last week will have significant implications for pension schemes looking at winding up, according to law firm Pinsent Masons, which acted for one of the groups of members involved in the case.

The case concerns a pension scheme which sought to provide money purchase benefits, which were contracted-out of the state earnings related pension scheme on the guaranteed minimum pension basis, and separate final salary benefits. The scheme was wound up in 2003 when the plants in Darwen and Morecambe closed in that year. There were insufficient funds to pay all the members' benefits in full.

In order to work out how much money each member would receive, the trustees had to take account of the statutory order of priority for securing benefits on winding-up at that time.

Money purchase benefits fall outside this regime, but final salary benefits do not Pinsent Masons said.

It added the funds relating to a member's money purchase benefits would therefore effectively be ring-fenced and so would not be available to secure any other member's benefits.

In practice, this means that members usually receive their money purchase benefits in full, even if members with final salary benefits receive a reduced benefit.

In this case, the court decided that, for schemes in winding up, the GMP should be treated as a separate benefit. The money purchase benefits therefore underpinned other benefits.

Stephen Scholefield, partner at Pinsent Masons, said: "It was unclear whether GMPs should be regarded as a benefit in their own right, as a previous court decision had suggested that they were simply a calculation factor.

"For members with money purchase benefits and a GMP, this decision means that their benefit falls within the statutory order of priority and is not ring-fenced. It is disappointing that the complexity of the law is such that, 10 years after it came into force, the court is still having to decide how it works."

The court's decision may still be appealed.