On 28 March 2019, Advocate General Tanchev gave an Opinion in the case of Safeway Ltd v Newton and another highlighting the need for pension schemes to check whether benefits have been correctly equalised in accordance with EU law. Although the Opinion relates to the specific steps that had been taken under the Safeway Pension Scheme's power of amendment, it emphasises the general requirement to comply with overriding EU legislation.
Like many pension schemes, the Safeway Pension Scheme (the "Scheme") had unequal retirement ages of 65 for male members and 60 for female members. In Barber v Guardian Royal Exchange Assurance Group the Court held that it was unlawful, pursuant to EU law, to discriminate by providing different retirement ages for men and women. As a result, the retirement ages of members of the disadvantaged sex (usually males) was automatically changed to that of the advantaged sex (i.e. benefits were "levelled up" to the more advantageous position for members). Generally, most pension schemes then chose to amend their scheme rules to "level down" benefits by providing both sexes with an equal, but later, retirement age. The period between the decision in the Barber case and a scheme's subsequent amendment to reflect equal retirement ages is known as the "Barber window".
The Trustees of the Scheme and the Employer in this case took various steps to equalise retirement ages and close their Barber window. In September 1991, an announcement was sent to members advising them that their retirement ages would be equalised at 65 for all service after 1 December 1991. On 1 December 1991, a further announcement was issued to members confirming that retirement ages would be equalised from that date. However, the definition of "Retirement Age" in the Scheme Rules was not formally amended by a deed until 2 May 1996. Unusually, the Scheme's amendment power allowed changes to be made retrospectively and did not protect accrued rights. It should also be noted that the 1996 deed of amendment was made before section 67 of the Pensions Act 1995 came into force.
The key question before the court was whether the 1996 deed was valid retrospectively so as to change retirement ages to 65 with effect on and from 1 December 1991 or whether the amendment could only have prospective effect on and from 2 May 1996.
In the High Court, the judge ruled that the 1991 announcement was not, on its own, enough to amend the Scheme rules. The Scheme's amendment power required a deed and, since a deed was not executed until 2 May 1996, retirement ages were not equalised at age 65 until that date. The High Court also held that the 1996 deed could not equalise retirement ages at 65 with retrospective effect to 1 December 1991. However, the Court of Appeal took the view that this retrospective effect was a possibility.
The Court of Appeal made a reference to the Court of Justice of the European Union (CJEU), asking it to confirm whether EU law imposes a blanket prohibition on retroactive "levelling down" or whether it is possible to level down with effect from an earlier date if the amendment power in the scheme rules permits it.
The Advocate General's opinion
Advocate General Tanchev has said that, during the Barber Window, the "prohibition under EU law of retroactive levelling down ... applies even when the rules of a pension scheme confer a power, as a matter of domestic law ... to reduce retrospectively the value of both men's and women's accrued pension rights". In the Safeway case, this would mean that the Scheme's amendment power could not be used to "level down" with effect from the 1991 member announcement because any amendment must be made prospectively.
Given the fundamental principle of equal pay within EU law, the Opinion is probably not unexpected. The decision of the CJEU is awaited and, whilst it is not obliged to follow the Advocate General's opinion, it will likely be very persuasive. In any event, this case acts as a useful reminder to schemes to ensure that 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.
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