Yahoo Finance Pensioners set for £15bn windfall after landmark gender equality case
Millions of pensioners are in line for up to thousands of pounds in extra payments after a court ruling today that overturns decades of retirement unfairness.
The High Court has ruled the Lloyds Bank pension was wrong to pay some of its final salary scheme members less than others, resolving a dispute about pensions equality dating back to the Nineties.
It must now pay members who missed out what they are owed, which could cost the Bank up to £500m.
The decision also sets a precedent that means thousands of other final salary schemes are likely to have to pay out billions of pounds, including arrears which could go back decades.
People who worked between 1990 and 1997 will benefit from the ruling. Amounts due will vary hugely, but estimates put the total bill at £15bn. With millions of pensioners affected, many will get thousands of pounds.
Anna Rogers of ARC Pensions Law said schemes also have to pay interest on arrears, “which is important given that the relevant service dates back over 20 years".
The Lloyds case was brought by three female members of the scheme who complained the rate at which their pension increased was lower than for their male counterparts. So in this case it is female members who will gain.
But because women get state pensions earlier than men, today’s ruling in favour of equality could mean some men also get increases.
The long-running dispute is around Guaranteed Minimum Pensions (GMPs), which apply to some people who reached state pension age before April 6 2016, when it was made up of two tiers: basic, based on national insurance records; and the additional, state earnings related pension scheme (SERPS).
From 1978 it was possible to “contract-out” of SERPS, where an employee and their employer would pay a reduced rate of national insurance, and the company had to pay a GMP in return for its tax break.
GMPs could be calculated differently for men and women because of their relative typical pension ages. For years, pension schemes have fought against altering their payments to correct for the inequalities caused by gender differences.
This ruling seems likely to resolve the matter once and for all.
Steve Webb of Royal London, the insurer, said: “It is good news that this ruling finally provides clarity over this contentious issue.
“Schemes will need urgent help from government and regulators to know the best way to respond to this judgment.
“Members of company schemes could collectively receive a multi-billion pound windfall, but the complexity of making the necessary calculations means that members will not be receiving cheques any time soon”.
Up to a million pensioners with GMPs already face being stuck with incorrect payments from the end of this month, because HMRC is switching off help to firms trying to match their records with those held by the State.
Widespread problems were found with the GMP records detailing who has paid what after they contracted out. Pension schemes have had since 2014 to sort this out but say they need more time to correct their records.
After October 31, HMRC will no longer let companies query cases in large numbers to save time, and instead they will have to do it on an individual basis, meaning it will take even longer than the current 6 months to ensure payments are correct.
Phil Titchener of Willis Towers Watson said: “GMPs are so complicated some people could end up with too little from the State and too little from their workplace scheme.”
laura.miller@telegraph.co.uk
