On the go: Safeway has reached the end of a pensions legal process that started in 2016, with the Court of Appeal ruling that its defined benefit scheme's normal pension ages were equalised retrospectively, but not for as long as initially predicted.
The courts were required to decide whether or not the steps taken by the former chain of supermarkets in the UK to equalise male and female retirement ages at 65 in 1991 in the Safeway Pension Scheme were valid.
Since the European Court of Justice’s 1990 Barber ruling, equalisation of retirement ages has been a persistent headache for schemes of all sizes, and subsequent legislation required trustees to make benefits uniform across genders.
The effect of Barber was that until measures had been taken to equalise the normal pension age, men and women accrued benefits on the basis of the advantaged sex, which usually meant men accrued benefits on the basis of women’s age, usually 60.
Safeway sent a letter to scheme members on December 1991 informing them that retirement ages had been equalised. However, a formal deed of amendment, which would make the changes retrospectively, was not entered until May 1996.
The retailer’s DB scheme rules provided that changes to the rules could be made by supplemental deed, which could take effect retrospectively. As a result, the pension fund had been administered on the basis that benefits were equalised in December 1991.
The Court of Appeal had questions about when the Barber window — the period from May 1990 until retirement ages are equalised by individual schemes — was closed, in 1991 or in 1996, referring the case to the Court of Justice of the EU.
According to law firm Osborne Clarke, the CJEU ruled that, even if a scheme’s power of amendment allowed changes to be made with retrospective effect, EU law would usually mean that an equal retirement age could only be introduced for service after the date the scheme rules were amended.
This means that the Barber window ended in May 1996 when the deed was executed.
However, the UK Pensions Act 1995 introduced an equal treatment rule into UK pension schemes with effect from January 1996, which the Court of Appeal considered, agreeing with Safeway that argued national law took over earlier that year.
The retirement age equalisation was effective from the beginning of 1996, but not from 1991, the court ruled.
Ian Gordon, partner and head of pension disputes at Gowling WLG, noted that Safeway avoided the worst-case scenario with this decision.
He said: “Although the difference between January 1 1996 and May 2 1996 might seem short in the context of a five-year window, it is likely to have represented a significant cost saving, given the total unintended liabilities for the period May 17 1990 to May 2 1996 had been estimated at more than £100m.”
Mr Gordon noted, however, that this decision will only be relevant to other pension schemes in very specific conditions.
He explained that where a scheme contains an amendment power that expressly permits retrospective amendments, and this power was used after January 1996 — but before April 1997 — “Safeway might be of interest”.
This is because before the Court of Appeal’s decision, the trustees “might have concluded that the amending instrument took effect prospectively only and had no retrospective effect”.
“Whether it is worth pursuing further will no doubt depend on the scale of the financial benefits enjoyed because of this narrowing of the Barber window,” Mr Gordon added.
