Home>Business>Court makes ‘£15bn pension ruling’
Business

Court makes ‘£15bn pension ruling’


Image copyright
Getty Images

A High Court ruling on gender equalisation of pension payouts could have an estimated £15bn effect on major pension schemes.

In the case, closely watched by the industry and government, three female members of Lloyds Banking Group’s pension scheme challenged the bank.

It surrounded the use of Guaranteed Minimum Pensions in the 1990s.

Consultants LCP recently estimated that the wider impact of the case could cost major companies £15bn.

However, there will now be widespread discussion on how this decision should be interpreted. This will mean people in retirement are likely to have a further wait for any extra pension payouts, and those payments could be relatively small. For a handful of people, this could mean an extra £1,000 a year, according to LCP.

The High Court ruled in favour of the three women in the Lloyds case – ordering it to change its pension schemes, at a cost of up to £150m.

A Lloyds spokeswoman said: “The hearing focused on what is a complex and longstanding industry-wide issue. The group welcomes the decision made by the court and the clarity it provides. The group and the pension scheme trustee will be working through the details in order to implement the court’s decision

On a wider level, the judgement means men and women should have the same benefits from historic pensions, potentially affecting millions of people.

The case has implications for members of so-called defined benefit pension schemes, such as final-salary pensions, who were working between 1990 and 1997 in the private and public sector.

The dispute is around the Guaranteed Minimum Pensions (GMPs) which schemes promised to pay when members were “contracted out” of the top-up state earnings-related pension scheme, which means they paid lower national insurance contributions in return for a higher private pension.

For many years, schemes have disputed whether they have to alter their payments to correct for these inequalities caused by the gender differences in GMPs.

Now some people – men and women – could receive a higher pension payout.

‘Certainty’

Chris Stiles, director of law firm Gowling WLG, said: “Having a High Court judgement on it does at least provide an answer, although the possibility of further litigation should not be ruled out.

“The conclusion that there is a duty to equalise GMPs and pay arrears does not come as a surprise, but the implications and potential costs are still very large. Most employers and trustees have, quite reasonably, been putting off dealing with this until there is more certainty.”

Former pensions minister Steve Webb, now director of policy at Royal London pensions company, 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.”

The Department for Work and Pensions said that it would be offering guidance to pension schemes in the near future following the ruling.



Source link

Review Overview

Summary

Leave a Reply

Your email address will not be published. Required fields are marked *