Equalisation: Court of Appeal lightens the load for Safeway, but what about other schemes?

The Court of Appeal has handed down its second judgment in the case of Safeway Limited v Newton and another. The Safeway scheme's power of amendment allowed amendments to take effect from the date of an earlier announcement.

The case relates to the steps taken to equalise male and female retirement ages, in particular, the question of whether a deed of amendment made in 1996 has validly introduced a retirement age of 65 (instead of 60) for men and women with effect from a date in 1991.

Subject to any further application, this latest decision reduces the liability for Safeway and could do the same for schemes that have an amendment power that is similar or that allows accrued benefits to be amended with member consent.

What is the background?

The Safeway scheme had a retirement age of 65 for men and 60 for women. Following the decision in Barber v Guardian Royal Exchange Assurance Group, the trustees and employer took steps to equalise male and female retirement ages at 65.

In 1991, an announcement was sent to members telling them that both men and women would have a retirement age of 65 for service after 1 December 1991. The scheme’s definition of "retirement age" was not formally amended by a deed until May 1996. However, the 1996 deed said that the equal retirement age of 65 applied with effect from 1 December 1991 (the date given in the announcement) and, crucially, the scheme's power of amendment allowed amendments to take effect from the date of an earlier announcement.

It was agreed that, for service before 17 May 1990 (the date the Barber judgment was handed down), the retirement age for male members was 65 and for female members was 60.

In relation to service during the period from 17 May 1990 to the date a scheme's rules are amended, the Court of Appeal had to consider the principle of European law that the scheme must "level up" benefits for the disadvantaged sex. This period is known as the "Barber window". In Safeway (like in many schemes) this levelling up meant that, during the Barber window, male members were entitled to benefits based on the same retirement age as female members (60), except where using age 65 would result in higher benefits. The equal retirement age of 65 could only apply to service after the Barber window had been closed.

The Court of Appeal made a referral to the Court of Justice of the EU (CJEU) to ask when the Barber window was closed in this case – on 1 December 1991 as stated in both the announcement and the 1996 deed or on the date on which the 1996 deed was executed (2 May 1996). The CJEU ruled that, even if a scheme's power of amendment allowed changes to be made with retrospective effect, EU law would usually (but not always) mean that an equal retirement age for male and female members could only be introduced for service after the date the scheme rules were amended. On the face of it, this meant that the Barber window ended on 2 May 1996 when the 1996 deed was executed.

What did the Court of Appeal decide?

The case returned to the Court of Appeal, which has now considered an issue that it held over pending the decision of the CJEU, being the effect of section 62 of the Pensions Act 1995 (Section 62).

Section 62 introduced an equal treatment rule into UK pension schemes with effect from 1 January 1996.

The Court of Appeal has held that:

• To close the Barber window, it was necessary to take measures which were "immediate, full, unconditional and legally certain (in the sense they must be sufficiently precise, clear and foreseeable to enable the persons concerned to know their rights and obligations, and to rely on those rights before national courts)".
• Section 62 passed this test because, when it came into force, it had the effect of requiring pension scheme rules to be read as if they had been modified to comply with the equal pay requirements of European law.
• The effect of section 62 was to "level up" the rights of men to those of women.
• This closed the Barber window, with the result that any amendments to the retirement ages applying for service on or after 1 January 1996 would be governed by UK law, rather than European law.
• Under UK law, it is possible to amend scheme rules to introduce a retirement age of 65 for men and women with effect from an earlier date, if the scheme amendment power allows this.

For Safeway, the court's decision means that the 1996 deed successfully introduced an equal retirement age for male and female members of 65 from 1 January 1996, instead of 2 May 1996. The effect of this decision is to shave four months from the Barber window, reducing Safeway's additional liability.

Osborne Clarke comment

The Court of Appeal's decision could help schemes with a similar amendment power to the Safeway scheme, provided that the amendment to close the Barber window was made between 1 January 1996 and 6 April 1997. This is because 6 April 1997 is the date on which section 67 of the Pensions Act 1995 (section 67) came into force to give statutory protection to accrued benefits, preventing retrospective amendments of this nature without member consent.

The decision could also help schemes whose amendment powers allow accrued benefits to be amended with member consent provided that, for amendments made on or after 6 April 1997, member consent is given for the purposes of section 67 as well for the purposes of the amendment power. This assumes that some of these schemes may have members willing to consent to such an amendment.

For other schemes, the decision adds another layer to the legal analysis around whether a scheme has equalised correctly, but is unlikely to make much difference to the final legal position. For schemes which have already equalised, this may come as some relief.