£100m Pension Windfall At Stake As Judge Sends Case To ECJ

Lisa Smith, BA (Hons), CeFA

Women disadvantaged by changes in a workplace pension scheme may be paid up to £100 million in compensation.

But they will have to wait for the European Court of Justice to decide.

The case dates to the early 1990s when now defunct supermarket chain Safeway, which was swallowed by Morrison’s, retrospectively raised the retirement age for women in the company’s workplace pension scheme from 60 to 65 years old.

The move equalised the retirement age for men and women working for the company.

The Court of Appeal upheld a ruling by the High Court that pension laws stop trustees from changing the terms of the schemes that reduce the rights of members.

Complex legal arguments

However, the rule was not in effect when the decision was made and the scheme’s rules did allow the trustees to change the retirement age.

The case is further complicated because the trustees voted to change the pension age before the provision to protect pension rights came into effect, but did not implement the change until after the law was changed.

Also, the ECJ ruled that pension rights should be equal for men and women from May 1990.

Announcing the decision of the court to make a referral to the CJEU, Lord Briggs of Westbourne said that it would “not be at all surprising if the obligation under EU law … could not be implemented by levelling down in relation to pensionable service in the past if to do so would detract from vested indefeasible rights from the domestic law perspective arising from that service.

“In such circumstances it would be understandable for EU law to require a process of levelling up rather than levelling down, as the only justified way of giving effect to the equal treatment principle without an unfair derogation from accrued rights.”

No clear result

Pensions expert Stephen Scholefield of lawyers Pinsent Masons pointed out that 27 years after the case, pension schemes and their advisers are still grappling with the practicalities of how to provide equal pensions for men and women.

“As in this case, it can be unclear whether the appropriate procedural boxes were ticked when schemes addressed equalisation. If not, costly windfall benefits may arise,” he said.

“While on a strict reading of the pension trust deed the boxes appear to have been ticked here, it involves an element of backdating. The ECJ may view this as depriving members of their accrued equal treatment rights and rule it to be unlawful.

“If backdating is allowed where permitted by the pension scheme trust deed, it could have significant implications for pension schemes in a similar position and mean that their equal treatment obligations are less than may have been assumed.”

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