Equalisation: Advocate General's opinion in the Safeway case suggests EU law overrides scheme powers

Advocate General Tanchev has given an opinion in Safeway Ltd v Newton and another. The opinion suggests that, even if a scheme power of amendment is wide enough to allow normal retirement ages to be 'levelled down' (that is, to allow the female retirement age to be increased from 60 to the male retirement age of 65) with effect from the date of an earlier announcement, EU law will prevent this. If, as is often the case, the Advocate General's opinion is followed by the CJEU, then this door will close for the Safeway scheme and for any others in a similar position.

What are the issues in this case?

The Safeway scheme had a male retirement age of 65 and a female retirement age of 60. Following the decision in Barber v Guardian Royal Exchange Assurance Group, the trustees and employer took steps to equalise male and female retirement ages. In September 1991, an announcement was sent to members telling them that their retirement ages would be equalised at 65 for service after 1 December 1991. However, the scheme’s definition of ‘retirement age’ was not formally amended by a deed until May 1996. Unusually, the scheme's power of amendment allowed amendments to be made retrospectively, with effect from the date of an earlier announcement to members.

The Court of Appeal confirmed that the 1991 announcement had not, on its own, been enough to amend the scheme rules: the scheme’s power of amendment could only be exercised by deed. However, whilst the High Court had ruled that the 1996 deed could not equalise retirement ages at 65 with retrospective effect to 1 December 1991, the Court of Appeal considered that this was a possibility.

The Court of Appeal made a reference to the CJEU, asking it to confirm whether EU law imposes a blanket prohibition on 'levelling down' (increasing the female retirement age to 65) between 1 December 1991 (the date given in the member announcement) and May 1996 (the date the normal retirement date was amended by deed), or whether it is possible to 'level down' with effect from 1 December 1991 if the scheme amendment power permits it.

Advocate General's opinion

Advocate General Tanchev has said that, in the period before scheme rules are formally amended to apply an equal retirement age of 65 (known as 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 for a period between the date of a written announcement of intended changes to the scheme and the date when the Trust Deed is actually amended". In the Safeway case, this would mean that Safeway and the trustees could not rely on the scheme power of amendment to 'level down' with effect from the 1991 member announcement.

We now await the CJEU's determination. The CJEU is not obliged to follow the Advocate General's opinion, but such opinions are highly persuasive and are followed more often than not.

Osborne Clarke comment

The facts of the Safeway case are unusual: the scheme's power of amendment permits changes to be made with effect from the date of an earlier announcement and does not protect accrued rights; and the 1996 deed was made before the coming into force of section 67 of the Pensions Act 1995.

As such, if the CJEU were to decide that it is possible to retrospectively level down retirement ages, its decision might only affect a limited number of schemes. However, the trustees and employers of schemes that may be affected should take note of the Advocate General's opinion and look out for the CJEU and final Court of Appeal decisions.