A look back to 2019
Key developments in the pensions sector include the following cases.
GMP equalisation – the questions continue
For many years there have been questions about whether pension schemes should equalise the guaranteed minimum pension (GMP) element of pensions payments. In October 2018, in the case of Lloyds Bank Group Pensions Trustees Ltd v Lloyds Bank Plc and Others  EWHC 2839 (Ch) the High Court settled the debate, and ruled that the GMP element of a pension should be treated as pay and that it is unlawful to pay men and women unequal GMP benefits.
The Court ruled that:
- First: Pension benefits are considered as pay. It is unlawful to pay unequal benefits and
- Second: On the method of achieving equalisation, the Court ruled that if multiple methods produce equality of benefits, the method which results in "minimum interference" with the rights of scheme members should be chosen. In that case, the scheme employer was entitled to insist on adopting the cheapest method.
No limitation period applies to claims for the payment of arrears, but this is subject to the scheme rules, which suggests that if the rules provide for forfeiture of unclaimed benefits after six years, the beneficiaries may not be able to claim benefits which accrued earlier. This ruling provides some clarity to a complex area, however, it falls short of providing complete guidance for schemes. There will follow a period of adjustment to this ruling, as schemes seek to implement the Court's decision.
In the meantime, it has been reported that in June 2019, the Lloyds Trustees requested that the Court provide further guidance on how past pension transfers taken by members who had GMPs should be dealt with. A hearing is expected on this issue in the early part of 2020.
Equalisation of normal pension age
Following the decision in Barber v Guardian Royal Exchange (Case C - 262/88), pension schemes were required to take steps to equalise retirement ages between male and female scheme members by amending scheme rules and issuing announcements to members. In many cases, however, no steps were taken or the steps which were taken to equalise retirement benefits were inadequate.
Failure to equalise retirement benefits results in professional negligence claims
A failure to properly equalise retirement ages could result in significant increases in a pension scheme's liabilities, as in the absence of an effective equalisation at the higher retirement age (typically applying to male members), schemes were required to adopt the earlier retirement age (typically that applying to female members) for both male and female members. The failure by schemes to equalise retirement benefits at the higher retirement age or the failure to do so effectively has resulted in large numbers of professional negligence claims against schemes' advisors.
Safeway Pension Scheme
The Court of Justice of the European Union (the ECJ) published its decision on 7 October 2019 in a reference from the Court of Appeal regarding the equalisation of the normal pension age ( NPA) applying to Safeway's defined pension scheme: Safeway Ltd v Andrew Richard Newton and Safeway Pension Trustee Ltd  – Case C-171/18.
The Safeway scheme rules stated that amendments to benefits provided by the scheme must be made by deed, but that the amendments could have retrospective effect from the date of a prior written announcement issued to members. In this case, an announcement regarding equalisation was made in 1991, but the deed was not executed until 1996.
The ECJ held that the member announcement issued by Safeway in 1991 to the effect that the NPA would be equalised at age 65 for men and women (having previously been 65 and 60 respectively) was not sufficient to close the "Barber Window" (that is the period between 17 May 1990 and the date that scheme benefits were equalised as between male and female members) because:
- it was not "immediate and full"; and
- it did not satisfy the need for legal certainty, i.e. to enable affected scheme members concerned to know precisely their rights and obligations following the purported equalisation.
The ECJ found that there was no objective justification for retrospective equalisation, however, this is for the Court of Appeal to verify. Therefore, continue to watch this space, as the matter has been referred back to the Court of Appeal.
What is on the horizon for 2020?
Pension Schemes Bill
The Pension Schemes Bill is currently going through parliament and received its first reading in the House of Lords on 7 January 2020. The proposed Bill creates a number of potential new criminal offences, including a proposed new offence of avoiding/reducing a debt on the employer without reasonable excuse or acting without reasonable excuse in a way which detrimentally affects the likelihood of accrued scheme benefits being received. This offence carries severe penalties including fines and up to seven years imprisonment.
It is proposed that the Bill will also introduce:
- A pensions dashboard
- Restrictions on the right to a statutory transfer, unless prescribed conditions are met; and
- A 'Collective Money Purchase Scheme' framework.