29 Oct 2018

Lloyds Banking Group Pensions Trustees Limited v Lloyds Bank plc and others (the Lloyds case)

On 26 October 2018, the High Court issued its long-awaited judgment in the Lloyds case. The case was seeking clarification of whether benefits had to be equalised between men and women for the unequal effect of guaranteed minimum pensions (GMPs) and, if GMPs needed to be equalised, how this could be achieved.


Occupational pension schemes have been grappling with equalisation of benefit issues since the Barber judgment on 17 May 1990, when the European Court of Justice decided that pensions were “pay” and that the principle of equal pay requires pension schemes not to discriminate on the grounds of sex in the provision of benefits. 

Whilst most defined benefit schemes have taken action to equalise benefits, for example by equalising normal retirement ages for male and female members, it has not been clear whether GMPs needed to be equalised and if so how. The calculation of GMPs is set out in legislation, they come into payment at different ages for women and men (age 60 and age 65 respectively) and have different accrual rates. 

The Court's decision: equalisation is required

The High Court decided that GMPs do fall within the definition of pay and, therefore, fall within the scope of equalisation requirements. It ruled that schemes are under an obligation to equalise for the period between 17 May 1990 (the date of the Barber judgment) and 5 April 1997 (after which GMPs no longer accrued). 

Four possible methods of equalisation were put forward for the Court to consider. The judge, Mr Justice Morgan, did not prescribe which method the Lloyds Bank Trustee should use, but his analysis of the different methods provides helpful pointers as to which methods would be appropriate. 

The judge relied on the principle of minimum interference finding that the chosen method should be the one which produces minimum interference with the rights of any party. He sets out which methods infringe the principle of minimum interference from the employer's standpoint, primarily because of the high cost of equalising, and which method infringes the principle from the beneficiaries' standpoint, because it would provide benefits based on actuarial assumptions rather than the actual circumstances.

The judge confirmed that converting GMPs to non-GMPs would be a possible option but this requires the employer's agreement. 

Limitation periods

The Court held that there is no limitation period when a beneficiary makes a claim in respect of underpaid benefits resulting from GMP inequality. Consequently, the position is determined by the rules of the pension scheme, specifically the provisions setting out the circumstances in which benefits will be forfeited. Any arrears due will be calculated by looking back from the present date and the length of the period for looking back will depend on the wording of the scheme rule. 

The judge decided that interest should be paid on any arrears due at the rate of 1% above base rate.

Future developments 

As this is a High Court decision, it may be appealed although there is no indication at this stage that an appeal will be brought. The Government was a party in the hearing and, as mentioned earlier, has been awaiting the judgment before proceeding with legislation for the equalisation of GMPs. However trustees and employers should consider the implications of the Lloyds case on their schemes as undue delay could be a breach of duty given that pensioners are currently receiving unequal GMPs. The judgment still leaves unanswered questions, for example, it did not comment on whether GMP equalisation exercises that have been carried out will need to be revisited.

Trustees and scheme employers should discuss the implications of the judgment for their schemes with their actuarial and legal advisers.