About 120 schemes administered by Prudential have been informed that their members could be receiving wrong pension payments, after incorrect calculations were identified in connection with a thirty year old legal case.
FTAdviser can reveal that the trustees of these defined benefit pension funds have been advised by The Pensions Regulator to speak to their legal and actuarial advisers, after Prudential informed the watchdog of the potential errors.
Members who have been affected by this mistake could be in line for a pension uplift of 25 per cent in some cases, but there is also the chance that the error resulted in overpayments.
A spokesperson at Prudential UK said the provider has identified DB schemes “where incorrect calculations may have been made to members’ benefits when schemes attempted to equalise benefits after the Barber judgment”.
The issue was discovered following a routine review of pensions payments, the spokesperson said, and Prudential is contacting trustees of affected schemes to raise its concerns and determine what actions, if any, need to be taken.
A spokesperson at TPR told FTAdviser its officials had “written to trustees and managers of approximately 120 schemes to make them aware that members may have had incorrect pension calculations,” which has been confirmed by Prudential.
In the Barber case almost 30 years ago, the European Court of Justice decided that the right to equal pay for men and women applied to occupational pension schemes, which meant men and women had to be given the same retirement age.
Until then, it was normal practice in the UK to have unequal retirement ages between male and female members, typically age 65 for men and 60 for women.
The court ruling dictated that for any period of pensionable service prior to May 17, 1990, equalisation of pension ages was not required.
But schemes had to set a date for equalisation and until that date came into effect, pension rights were gradually levelled up, in what it was called the Barber window.
This meant that disadvantaged members were entitled to more favourable treatment, which generally meant that male members were entitled to a lower retirement age.
David Everett, partner at consultancy firm LCP, explained that in theory, equalising normal retirement ages after Barber should “have been done and dusted by the mid-1990s”.
However, there were a series of court cases where the equalisation hadn’t been carried out properly, he noted.
He said: “The legal cases that came out refer to the fact that the Barber window wasn’t closed properly, sometimes equalisation was never put through.
“There may well be cases where some kind of equalisation was put through, legally it was ok but the actual administration didn’t work.”
Anna Rogers, senior partner at ARC Pensions Law, explained the issues weren’t confined to schemes administered by Prudential.
She said: “It is quite common to find that sex equalisation was done in a way that doesn’t quite work, with the benefit of hindsight.
— to www.ftadviser.com