The ongoing litigation relating to when the Safeway Pension Scheme effectively equalised Normal Retirement Dates (NRDs) between male and female members has finally reached its conclusion in the Court of Appeal.
In the latest instalment of the case, the Court determined that the Scheme had equalised NRDs to age 65 from 1 January 1996; the date that Section 62 of the Pensions Act 1995 that introduced an equal treatment rule into pension schemes became law. This was a different date to the date previously determined by the High Court, 2 May 1996, which was the date of the relevant deed of amendment to equalise NRDs was executed (and different again to the date which the deed purported to have retrospective effect from: 1 December 1991).
Whilst of significant interest to the pensions industry as equalisation affected almost every DB pension scheme in the UK, the conclusion reached by the Court in this case is only likely to have much practical effect for schemes which executed deeds to equalise NRDs after 1 January 1996 and before 5 April 1997, with purported retrospective effect to before 1 January 1996. For any pension scheme in this category (in practice, we do not expect there to be many), the scheme would be permitted to treat NRDs as having been equalised from 1 January 1996, rather than the later date of the deed. The 1997 date is significant because it was from 5 April 1997 that Section 67 of the Pensions Act became effective to prohibit retrospective amendments that might detrimentally affect a member’s accrued pension rights.
We have reported on the facts of the case previously, but in summary:
Safeway Limited (the principal employer of the Scheme) originally contended that NRDs had been equalised between men and women at age 65 on 1 December 1991, which was the date notified to members in a written announcement (and the purported effective date of the deed of amendment executed on 2 May 1996 (the 1996 Deed)).
The High Court concluded that the power to amend the Scheme could only be exercised by deed, even if the deed could have retrospective effect to the date of the 1991 announcement. However, the High Court also decided that the power to make amendments retrospectively to equalise NRDs at the level of the disadvantaged class (in this case, age 65), following the Barber judgment in May 1990, could not be exercised with retrospective effect under EU law.
The effect of the Barber case was that NRDs were equalised at the level of the advantaged class (in this case, NRD 60, which was previously the female members’ NRD) from 17 May 1990 until such time as the pension scheme took effective measures to alter, or “level down” that NRD at a later date (typically to NRD 65). Accordingly, the High Court concluded that the course of action taken in the Safeway case, which involved an attempt to “level down” benefits with retrospective effect, would be contrary to the EU law principle of equal treatment.
On appeal, the Court of Appeal decided to refer this European law question to the Court of Justice of the European Union (CJEU) and the CJEU decided in October 2019 that, in the absence of objective justification, a pension scheme was, indeed, prohibited from adopting a measure which equalises NRDs with retrospective effect to the level of the previously disadvantaged (male) member. This was the case even where such retrospective measures were permitted under domestic UK law and under the trust deed and rules of the particular pension scheme.
Facts of the Court of Appeal case
The case then went back to the Court of Appeal, and the Court of Appeal was asked to consider a separate but related question, concerning the effect of Section 62 of the Pensions Act 1995. The question was whether the Barber “window” (i.e. the period between 15 May 1990 and the effective date of NRD equalisation) had been closed from 1 January 1996 (the date Section 62 of the Pensions Act came into force), or 2 May 1996 (the date of the 1996 Deed).
Safeway’s argument was that because Section 62 was an effective domestic law measure implementing Article 119 with respect to future pensionable service (Section 62 introduced into every UK occupational pension scheme an equal treatment rule), from that date onwards the level of member benefits became a UK domestic law issue. It went on to argue that, as the 1996 Deed was effective as a matter of UK law to level down NRDs, it was only “nullified” by Article 119 until the introduction of Section 62. Safeway argued that the 1996 Deed could therefore become effective from 1 January 1996 to “level down” from that date.
The Court of Appeal summarised the relevant EU law requirements for a Barber window to be effectively closed, which was that a measure put in place must be “immediate, full, unconditional and legally certain”.
The decision in the Court of Appeal and conclusions
The Court of Appeal allowed Safeway’s appeal, finding that Section 62 did give a full, immediate and unconditional right to members to enforce the terms of the equal treatment rule, which was a full implementation of the Article 119 right. Accordingly, once Article 119 had been enacted effectively under Section 62, pension schemes were permitted to reduce the level of benefits payable by levelling down NRDs to age 65.
In practice, this meant that the 1996 Deed in this case could become immediately effective from 1 January 1996 (i.e. a few months earlier than the May execution date). However, whilst this judgment was clearly helpful to the Safeway Scheme, with reports of significant liability savings as a result of the 1 January 1996 equalisation date rather than the 2 May 1996 date, the Court’s analysis supporting a 1 January 1996 equalisation date is unlikely to be relevant to many other schemes. This is because the majority of UK pension schemes executed equalisation deeds prior to 1 January 1996. Furthermore, if a scheme executed a deed after 5 April 1997 then Section 67 would prevent the deed having retrospective effect in any event.
— to www.lexology.com