Pensions

The latest Safeway Ltd v Newton judgment was delivered by the CJEU on 7 October 2019. It held that the retrospective amendment of Safeway Pension Scheme’s (the “Scheme”) accrued rights, by way of written announcement, contravenes EU law. This is regardless of whether it is permitted by domestic law and a scheme’s trust deed and rules.

Now the Court of Appeal must determine whether an ‘objective public interest justification’ exists that will allow the retrospective amendments.

Background

We have previously blogged on the journey of this case through the courts – you can read that here.

By way of a brief summary, the dispute concerns Safeway’s efforts to equalise its employees’ retirement ages. Like many pension schemes, the Scheme had unequal retirement ages of 65 for male members and 60 for female members. Barber v Guardian Royal Exchange Assurance Group held that it was unlawful, pursuant to EU law, to have different retirement ages for men and women. As a result, the retirement age of members of the disadvantaged sex (usually males) was automatically changed to that of the advantaged sex. This is often referred to as “levelling up” benefits.

Most pension schemes chose to amend their scheme rules to “level down” benefits going forward by providing an equal, but later, retirement age for both sexes.

In an attempt to equalise, Safeway raised the pension age for all members to 65. Thus levelling-down female members’ pension benefits. Importantly, these events happened before s.67 of the Pensions Act 1995 came into force, which limits modifications to schemes that would detrimentally affect accrued rights without members’ consent.

However, here, the Scheme’s trust deed and rules allowed for retrospective amendments from the date of an announcement to members, if execution of a formal deed was also carried out. The deed in question was executed, five years later, and was intended to have retrospective effect.

Decision

Safeway’s submission that equalisation was secured by its announcement to members was rejected. The CJEU held that the Scheme could only be amended by a deed.

This left the question: was it permissible to use retrospective amendments where this is allowed by domestic law and by the Scheme’s trust deed and rules? The court held that it was not. Retrospective levelling-down is also not permitted by EU law.

It is pertinent to note that Safeway Ltd v Newton is an English case. Requirements for deed validity differs between jurisdictions and unlike English Law, case law suggests that the word “deed” has no technical meaning in Scots Law.

Objective public interest justification

The CJEU held that if there is an “objective public interest justification” an amendment intended to equalise the scheme with retrospective effect, may, exceptionally, be permitted. In particular, the risk of jeopardising the financial stability of a scheme may constitute such an ‘overriding reason in the public interest’.

The Court of Appeal will now interpret this exception and determine whether to apply it to this case.

The decision will have an impact on Safeway but will also have a wider reach, affecting any other schemes in this position.

In any event, this case continues to act as a useful reminder to ensure that any amendments to scheme rules are made in accordance with the precise terms of the scheme’s amendment power and also in accordance with relevant domestic and (where applicable) EU legislation.

If you would like to discuss anything raised in this blog, please get in touch with your usual contact at Brodies.

Poppy Prior