The Court of Appeal has issued a judgment which may re-open the question of whether equalisation of benefits between male and female members can be achieved retrospectively.
The Safeway Pension Scheme (Scheme) was originally established in 1978 and, in line with many schemes at the time, provided for a normal retirement date (NRD) of 60 for female members and 65 for male members.
On 17 May 1990 the European Court of Justice held, in Barber v Guardian Royal Exchange (what you may sometimes hear referred to as the Barber case) that pensions are deferred pay, and therefore subject to the principle of equal treatment under Article 119 of the Treaty of Rome. As a result, all schemes which had unequal NRDs for their male and female members had to take steps to equalise them. Later decisions of the European Court of Justice confirmed that:
- Equal treatment is only required in respect of benefits built up on and from 17 May 1990
- Between 17 May 1990 and the date on which benefits are properly equalised (for instance by raising NRD for all members to 65) – this is often referred to as the Barber 'window' – the disadvantaged sex should be treated the same as the advantaged sex, that is, male members should be treated as having the same lower NRD as female members. The cost implications can therefore be substantial, and the greater the wider the Barber 'window'.
On 1 September 1991 an announcement (1991 Announcement) was issued to all members of the Scheme advising them that, with effect from 1 December 1991, NRD would be 65 for both sexes. This was not followed up by a Deed of Amendment until 2 May 1996, which also confirmed that the equalisation of NRDs took effect from 1 December 1991.
At first instance, the High Court (Mr Justice Warren) had been asked two questions:
- Whether the Scheme could be amended by an announcement or whether a deed of amendment was required
- Whether, if a deed of amendment was required, it could retrospectively (with effect from the date of the 1991 Announcement) amend the Scheme Rules to provide an NRD of 65.
The High Court determined that on the first question, a deed of amendment was required by the terms of the amendment power, and the Court of Appeal agreed.
On the second question, Mr Justice Warren followed the long established principle (which he had first set out in his own judgement in 2006 in the case of Harland & Wolff Pension Trustees v AON Consulting Financial Services) that raising NRD to 65 with retrospective effect was contrary to EU law. In his view, benefits built up by both sexes between 17 May 1990 and the date of the Deed of Amendment must continue to have a NRD of 60 and this cannot subsequently be taken away under EU law. However, the Court of Appeal queried this decision.
The Court of Appeal commented that, where retrospectively raising NRD to 65 would detract from "vested indefeasible rights" from the perspective of domestic law, then it would be "understandable" for such retrospectivity to be contrary to EU law. Consequently, it agreed that benefits built up by both sexes from 17 May 1990 to the date of the 1991 Announcement would continue to have a NRD of 60.
However, in respect of benefits built up after the date of the 1991 Announcement, the Court of Appeal considered that members only had a "defeasible right" to a NRD of 60. This is because, at any time, in accordance with the amendment power, Safeway and the Scheme's Trustees could execute a deed of amendment which retrospectively gave effect to the 1991 Announcement.
Consequently, the Court of Appeal disagreed with Warren J that the position under EU law is sufficiently clear on this point. It has referred to the Court of Justice of the European Union the question of whether a "defeasible right" can be removed retrospectively where this is permitted under domestic law.
In part, this decision turns on the wording of the amendment power in question; certainly not all amendment powers enable deeds or other instruments of amendment to have retrospective effect by reference to the date of an earlier announcement, or any other date. However, the ultimate outcome of the case will be of interest in potentially qualifying the established principle that raising NRD to 65 with retrospective effect is always contrary to EU Law.
Depending on the ultimate outcome, trustees and employers may need to revisit the equalisation of benefits under their scheme; in some cases it could mean reassessing when equalisation was in fact achieved and so whether the Barber 'window' was closed sooner than may previously have been advised. If so, the costs savings for schemes could be substantial.