Equalisation ruling £100m to £500m5 Jul 2018 15:44
A landmark legal action against Lloyds by members of the bank’s pension scheme could lead to a £20bn bill for thousands of other business, unions have warned.
On Thursday, the High Court will begin hearing a case involving three female members of the Lloyds Banking Group pension scheme, who are claiming sex discrimination because their pensions increase at a lower rate than those of male members.
Industry sources have estimated the potential cost to Lloyds from an equalisation ruling at £100m to £500m.
But the outcome of the case could have implications for thousands of other employers in the public and private sectors running traditional final salary retirement schemes. The government has made a submission to the court as part of the hearing.
“This case has profound implications for both public and private sector pension schemes,” said BTU, the trade union representing Lloyds staff.
“Up to 5m women have either got or are going to get smaller pension increases than men and that is simply unacceptable.
“According to a number of industry bodies, the cost of equalising guaranteed minimum pensions across all contracted out pension schemes could be up to £20bn.”
The legal action centres on “Guaranteed Minimum Pensions”, or retirement benefit rights for workers who were contracted out of the State Earnings Related Pension (Serps) between 1990 and 1997.
Lloyds was one of thousands of public and private sector employers that “contracted out” their employees from a system that allowed workers to build extra state pension above their basic entitlement.
Under contracting out, employees and employers were allowed to pay a lower rate of national insurance, but in return business promised a GMP to employees, which was to be “broadly equivalent” to what they would have received from the state pension, had they not been contracted out.
Currently, rules allow GMPs to be calculated differently for men and women. The High Court has been asked to rule whether GMPs need to be equalised and if so, how this should be done.
“In the past, state pensions were paid to men and women at different ages,” the trustees of the Lloyds pension scheme said in a briefing to members.
“This is still the case for GMPs. As a result, women and men built up GMPs at different rates and their GMPs are payable at different dates. In 1990, the law changed and all UK pension schemes had to equalise pension ages for women and men. However, the law setting out the way their GMPs were treated did not adjust in line with this change.”
The trustees said the case was only likely to affect pension members who had accrued GMPs between May 17 1990 and April 6 1997, and they were “unlikely to see a big difference in their pension” if the court ruled for equalisation, because GMPs were only a small part of their benefits.
A ruling is not expected until later this year.
https://www.ft.com/content/9581f0ec-7f65-11e8-8e67-1e1a0846c475
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