Equalisation: CJEU leaves the door open for the Safeway scheme

The Court of Justice of the European Union has handed down its judgment in the case of Safeway Ltd v Newton and another.  Whilst the judgment confirms the general rule, it also leaves the door open for the Safeway scheme and others in a similar position.

What is the case about?

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, a communication 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.

What did the CJEU decide?

The CJEU ruled 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 usually prevent this.

However, it went on to say that this kind of amendment would "exceptionally" be possible "where an overriding reason in the public interest so demands and … the legitimate expectations of those concerned are duly respected".  "In particular, … the risk of seriously undermining the financial balance of the pension scheme concerned may constitute such an overriding reason in the public interest".

For the Safeway scheme, this means that the Court of Appeal will now need to decide whether using the May 1996 deed to increase the female retirement age from 60 to the male retirement age of 65 with effect from 1 December 1991 (the date given in the 1991 announcement to members) "was necessary to prevent the financial balance of that pension scheme from being seriously undermined".   We expect the Court of Appeal will also be asked to consider some other questions, which were put on hold pending the reference to the European court.

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.  However, there will be a small number of schemes who are in a similar position to the Safeway scheme.  The trustees and employers of these schemes will need to pay attention to what happens when the case returns to the Court of Appeal.