More than 28 years after the Barber judgment changed the pensions landscape permanently, the High Court has issued its landmark decision in Lloyds Banking Group Pensions Trustees Ltd v Lloyds Bank Plc & others. Back in 1990, the European Court of Justice confirmed, in Barber v Guardian Royal Exchange Assurance Group that there was an obligation to treat men and women equally in relation to benefits under an occupational pension scheme - BUT the obligation to equalise did not extend to state benefits (or Guaranteed Minimum Pensions ("GMPs") because they mirrored the difference in mandatory state retirement ages). Now, the Lloyds Bank case has at last sought to address that point.

GMPs are benefits provided to employees who were contracted-out of the state earnings-related pension scheme (SERPS) between 1978 and 1997. The case was brought by the trustee of three of the Lloyds Bank pension schemes, seeking a ruling from the court on whether there was an obligation to equalise benefits for male and female members where the discrepancy is as a result of GMPs; and, if so, what method should be adopted to do so; and whether there should be any time limit on a member's right to claim in respect of previously underpaid benefits.

In summary, in his judgment handed down on 26 October 2018, Mr Justice Morgan held that:

  • The Trustee must adjust benefits in excess of GMPs under each of the schemes in order that the total benefits received by male and female members with equivalent age, service and earnings histories are equal.
  • Various legal options are available to effect equalisation but the method adopted must not breach the "principle of minimum interference". This means that the Trustee was not entitled to adopt methods which are more generous to members than necessary.
  • Beneficiaries are entitled to receive arrears of payments due to them together with simple interest at 1% above base.
  • The period for which beneficiaries are entitled to receive arrears of payments is governed by the rules of the individual scheme.
  • By virtue of section 21(1)(b) of the Limitation Act 1980, there is no time limit on recovering overpayments from scheme members.

The judgment has been widely welcomed by the industry as providing some long awaited clarity but it does also leave open a number of difficult issues, such as comparators. We would therefore expect that, like the Barber judgment before it, there will be further court cases to follow. However, in the meantime, employers and trustees of schemes containing members with GMPs will need to seek legal advice. It is not clear whether Lloyds will now appeal. We would expect that an indication of whether or not they intend to do this will emerge in the next four weeks based on timescales set out in the English civil procedure rules. Trustees should use that timeframe to assess what the outcome of this decision means for their schemes

We will continue to work through the judgment and our analysis of the financial and legal consequences and will be posting further updates - watch this space!


Jennifer Crawford

Senior Associate