Lloyds Banking Group Pensions Trustees Ltd v Lloyds Bank Plc & Ors

Benefits under contracted-out occupational pension schemes are pay for the purposes of Article 157 TFEU, even where guaranteed minimum pensions arise from legislation and substitute for part of the state pension. Statutory differences between male and female GMPs cannot justify unequal occupational benefits where the statutory criterion is merely a proxy for sex and the resulting payments do not equalise an earlier inequality.

Equalisation must secure equality, transparency and effective review. A term-by-term approach is generally appropriate, but complex pension structures may permit comparison of the overall benefit. The lawful method must also involve minimum interference with scheme rights. In this case, method C2 was required.

The claimant trustee sought declarations concerning GMP equalisation in three large contracted-out defined benefit occupational pension schemes. Female and male members with equivalent age, service and earnings histories could receive unequal total benefits because the statutory GMP regime used different pensionable ages and accrual calculations, while the schemes applied different increases and revaluation to GMP and excess benefits.

The court was asked whether equalisation was required, which equalisation methods were lawful, how past underpayments and interest should be addressed, and whether GMP conversion legislation could be used. Issues concerning transferred benefits and the proposed de minimis approach were deferred.

1. Equalisation required. The court held that the relevant scheme benefits were pay under Article 157 TFEU. Following Barber v Guardian Royal Exchange Assurance Group (C-262/88) [1991] 1 QB 344 and Beune (C-7/93) [1995] 3 CMLR 30, statutory origin, partial substitution for SERPS and integration with the state pension did not remove that character. Newstead v Department of Transport and HM Treasury (C-192/85) [1988] 1 CMLR 219 did not assist after Barber.
2. The GMP provisions were a sex-based proxy. The statutory differences were not an objective difference independent of sex and did not establish a material-factor defence under section 69 of the Equality Act 2010. The limited reasoning in Roberts v Birds Eye Walls Ltd (C-132/92) [1994] ICR 338 and Hlozek v Roche Austria GmbH (C-19/02) [2005] 1 CMLR 28 applied only where unequal treatment was intended to correct an earlier inequality and produced overall equality.
3. The Trustee was therefore obliged to adjust excess benefits so that comparable male and female members received equal total benefits for the Barber window.
4. European and domestic law generally require attention to each element or term of remuneration, ensuring transparency and effective judicial review. However, the Schemes’ GMP features were calculation factors operating together in a complex structure. The overall benefit was therefore the relevant term, and method A3 was not the only permissible method.
5. The principle of minimum interference required comparison of available methods and avoidance of unnecessary substantive alteration of scheme rights, following Foster Wheeler Ltd v Hanley [2009] EWCA Civ 651 and Safeway Ltd v Newton [2018] Pens LR 2. Method A was impermissibly costly from the Banks’ standpoint, while method D1 altered beneficiaries’ rights by substituting actuarial assumptions for actual scheme payments. Methods B, C1 and C2 were lawful, but C2 was required as the least interfering method.
6. Method D2 was potentially lawful under sections 24A–24H of the Pension Schemes Act 1993, including for survivors at conversion, but was unavailable because employer consent under section 24E(2) had not been given.
7. Beneficiaries were entitled to arrears. The Scheme rules governed the recoverable period. Section 21(1)(b) of the Limitation Act 1980 prevented limitation while trust assets remained in the Trustee’s possession, and the six-year restriction in section 134 of the Equality Act 2010 infringed the principle of equivalence. Arrears carried simple equitable interest at 1% above base rate.

First-instance decision. Issues concerning transferred-out benefits and the proposed alternative method for members for whom equalisation costs might exceed benefits were deferred.