Equalisation of guaranteed minimum pensions dominated the legal headlines in 2018, and the issue looks set to rumble on in several cases next year, write Samantha Brown and Tim Smith of Herbert Smith Freehills.
Judgments were handed down in several landmark pension cases, including in Lloyds Bank (regarding GMP equalisation), G4S (on the status of members with a final salary link) and the appeal in British Airways (regarding the 'proper purpose' principle).
Nearly three decades after Barber, the issue of equalisation looks set to continue to dominate the headlines
Further hearings in two of these cases are expected next year, with more cases besides. So, what should you look out for in 2019?
Lloyds Banking Group Pensions Trustees Limited v Lloyds Bank Plc – Hearing on historic transfers
Although the judgment handed down on October 26 2018 answered many of the questions raised by the parties, some important questions were left unanswered, including:
Whether there is an obligation on the trustees to equalise benefits previously transferred in to the schemes.
The extent of any obligation on the trustees to revisit historic transfers out.
The extent to which the trustees can rely upon the statutory discharge under section 99 of the Pension Schemes Act 1993 or the discharge under their scheme's rules.
Assuming there is no appeal, it is anticipated these questions will be considered at a hearing early next summer.
The outcome will confirm the extent of the obligation on trustees to equalise benefits under their scheme. It may also clarify how the statutory discharge and discharge provisions under scheme rules operate more generally where transfers have been underpaid.
Safeway v Newton – CJEU reference regarding ability to 'level down' retrospectively
Since Harland v Wolff in 2006, it has widely been accepted that EU law required that during the 'Barber window' (ie the period between the Barber judgment and the date on which measures come into force to effect equalisation) the retirement age of the disadvantaged sex had to be 'levelled up' and could not be 'levelled down', even where there was power under a scheme's rules to reduce benefits during that period, which has been exercised.
However, this question has now been referred to the Court of Justice of the European Union by the Court of Appeal and a decision is expected in 2019.
If the CJEU decides that benefits cannot be levelled down retrospectively, even where a scheme's rules permitted this, it could set an important precedent in the context of equal treatment more widely.
It would mean that male and female members of the Safeway Pension Scheme will enjoy better rights than either enjoyed prior to the decision in Barber, albeit that this is what the pensions industry has understood the effect of Barber to be.
On the other hand, if the CJEU decides that benefits can be levelled down, the Safeway Pension Scheme stands to benefit to the tune of £100m, and other schemes may benefit too. However, the number will be limited.
Airways Pension Trustee Limited v British Airways – appeal to the Supreme Court
The trustees’ appeal to the Supreme Court is due to be heard in July 2019. The judgment should confirm the scope of the 'proper purpose' principle and the extent to which it can restrict amendments even where they are within the scope of a scheme's amendment power.
The judgment should also clarify the extent (if at all) to which trustees can assume unilateral responsibility for determining the benefits payable under their scheme.
In this regard, the judgment may provide an important safeguard for employers against trustees wanting to grant additional benefits.
Burgess v Bic – is the Pensions Ombudsman a "competent court"?
A final case to look out for is the Court of Appeal's judgment in Burgess v Bic UK Ltd. At first instance, Arnold J, raised doubts about whether the Pensions Ombudsman is a "competent court" which can order recoupment of overpayments from members where the amount is in dispute for the purpose of section 91 Pensions Act 1995.
In his recent determination in Dr E (PO-16856), the Ombudsman asserted, unsurprisingly, that he is a competent court for these purposes. Hopefully, the Court of Appeal will confirm this either way.
So, 2019 promises to be another busy year for pension litigators and, nearly three decades after Barber, the issue of equalisation looks set to continue to dominate the headlines.
Samantha Brown is a pensions partner who acted on both the Lloyds Bank and G4S cases, and Tim Smith is a professional support lawyer, both at Herbert Smith Freehills.
