Court of Appeal asks CJEU for guidance on retrospectively raising women’s retirement ages

Section 67 of the 1995 Pensions Act prevents pension schemes from making changes to the scheme rules that would reduce members’ accrued rights. However, this provision was not yet in effect when the trustees of the Safeway pension scheme equalised member benefits in by increasing the normal pension age (NPA) for female members of the scheme to 65 to match that of the men, something that was also permitted by the particular pension scheme rules.

Separately, the Court of Appeal upheld a ruling by the High Court that the pension scheme rules were “unmistakeable” in that the trustees were required to make any changes to the scheme by deed. The trustees had argued that equalisation occurred on 1 December 1991, in line with written notification of the change that was provided to the scheme members; but the deed formally amending the scheme was not executed until 2 May 1996.

Pushing back the change in line with the date of the deed will cost the scheme more than £100 million, according to the Court of Appeal. This cost could be even higher if the Court of Justice of the European Union (CJEU) finds that the trustees were not entitled to disadvantage the female members of the scheme by raising their NPA.

In a 1990 case known as Barber, the CJEU ruled that pension benefits much be equal for men and women in respect of service from 17 May 1990. The case continues to have technical and legal repercussions for the UK’s defined benefit (DB) pension schemes due to the complexity of the issues raised by the judgment, particularly in relation to certain contracted-out pension rights.

“Some 27 years after the Barber case, pension schemes and their advisers are still grappling with the practicalities of how to provide equal pensions for men and women,” said pensions expert Stephen Scholefield of Pinsent Masons, the law firm behind Out-Law.com. “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.”

“Whilst on a strict reading of the pension trust deed the boxes appear to have been ticked here, it involves an element of backdating. The CJEU may view this as depriving members of their accrued equal treatment rights and rule it to be unlawful. If, however, 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. Another ‘legal lottery’ about the wording of pension trust deeds may be around the corner,” he said.

In the Barber case, the CJEU decided that the use of different NPAs for men and women in an occupational pension scheme was in breach of the equal treatment principle of EU law. The Court of Appeal, however, said that it was not clear from the case law whether this permitted a “levelling down” of the rights of the female scheme members who were the “previously-advantaged class”, or whether this would also be considered unfair.

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,” he said.

Regardless, the scheme rules were clear that any changes had to be made by deed, the judge said. The language of the relevant clause was “not merely plain, it is unmistakable”; and the Safeway accountant called upon to give evidence had not been able to establish that “some custom of the trade required [the clause] to be given a special meaning”. Arguments that the judgment would expose the trustees to claims for breach of trust also failed.

“Pension trustees who administer their schemes upon the basis of announced alterations on the assumption that they will in due course be confirmed by an authorised amendment, with retrospective effect, do so at their own risk,” the judge said.

Commercial litigation expert Craig Connal QC said that the decision on this point was not a surprise.

“Taking on the wording head-on is likely to lead to a collision with only one likely winner,” he said.

“What may be left open is the not-uncommon, and perhaps more nuanced, situation where records – and memories – are sparse and paperwork meeting the rules cannot be found. Depending on precisely how the materials are presented, these cases – especially where all concerned have operated for a very long time on the basis that the change had been validly made – may yet lend themselves to an argument based on the presumption of regularity. Absence of evidence is not necessarily evidence of absence,” he said.

A Scottish court came to this conclusion earlier this year, in a case involving four pension schemes operated by the Johnston Press group.