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

The High Court held that the trustee of the three large Lloyds/HBOS occupational pension schemes was obliged to remedy sex discrimination arising from guaranteed minimum pensions (GMPs) accrued in the Barber window (17 May 1990 to 5 April 1997). The court concluded that benefits under the Schemes constitute "pay" for the purposes of Article 157 TFEU (and so fall within the equal pay principle) and that the domestic sex-equality rule in the Equality Act 2010 (ss 67–68) also requires equalisation.

The judge rejected the banks' contention that unequal GMPs are outside Article 157 because they are a substitute for state earnings‑related pensions or otherwise reflect an objective difference between men and women. The court held that the statutory GMP regime is effectively a proxy for sex and so cannot be relied on to justify unequal treatment in the occupational schemes (Roberts/Hlozek arguments were distinguished and limited by Kleist).

The court addressed permissible methods of equalisation and, applying the "term by term" principle, transparency and the principle of minimum interference, rejected the trustees' preferred and the banks' preferred extreme options. It ruled that a year‑by‑year accumulated offsetting approach with allowance for the time value of money (Method C2 in the parties' agreed taxonomy) is lawful and, absent employer consent to statutory GMP conversion, is the method the trustee should adopt (the court concluded the trustee must adopt an approach which gives effect to equality with minimum interference in the rights of other parties).

The court also ruled on retrospective remedies: trustees must make back payments where underpayments have occurred; scheme rules that extinguish claims after six years are valid in form, but (i) a beneficiary's proprietary claim against a trustee in possession of trust assets is not time‑barred by the Limitation Act 1980 (s 21(1)(b)), and (ii) a six‑year statutory restriction in the Equality Act 2010 (s 134) cannot operate to deny such claims insofar as it would conflict with the principle of equivalence under EU law. Interest on arrears in equity was fixed at simple interest of 1% above base rate.

Background and parties

This first instance Part 8 claim, brought by the trustee of three large occupational pension schemes of the Lloyds Banking Group, sought authoritative rulings on whether and, if so, how to equalise pension benefits affected by guaranteed minimum pensions (GMPs) accrued between 17 May 1990 and 5 April 1997 (the "Barber window"). The respondents included the principal employers, representative female members of the schemes and the Crown (Secretary of State for Work and Pensions and HM Treasury).

Nature of the claim / relief sought

• The Trustee sought answers to a set of issues: whether trustees are obliged to equalise non‑GMP benefits to offset sex inequalities caused by GMPs; whether any defence (state substitution, objective difference or material factor) applies; which equalisation methods are lawful and/or appropriate; and the scope and remedies for past underpayments, transfers in/out and interest.

Procedural posture

The matter was heard at length before Morgan J (5–18 July 2018). The Tribunal stayed an employment tribunal claim to allow these issues to be resolved comprehensively in the High Court.

Issues framed

1. Legal obligation to equalise total scheme benefits in respect of service in the Barber window (Art 157 TFEU / EA 2010 / PA 1995 / express equality rules).
2. Defences argued by employers: GMPs as substitute state benefit / objective factual difference / material factor under s 69 EA 2010.
3. Choice of method to equalise (party‑agreed Methods A–D, including actuarial conversion and year‑by‑year options) and whether the court should accept surrender of trustees' discretion.
4. Remedies for past underpayments (retrospective period, limitation, interest) and treatment of transfers in/out.

Court’s reasoning (concise)

(i) Character of the benefits: the court followed Barber and subsequent ECJ jurisprudence (Coloroll, Beune, Pirkko Niemi, &c) in treating occupational scheme benefits (including contracted‑out schemes that contain GMPs) as "pay" under Article 157. It rejected the banks' argument that GMPs should be treated as outside Article 157 because they substitute for state earnings‑related pensions: the earlier authorities (e.g. Newstead) did not survive Barber and its progeny.

(ii) Justification/defences: the court rejected the submissions that the statutory structure of GMPs constituted an objective, non‑sex proxy that could lawfully justify unequal total occupational benefits. The judge considered Roberts and Hlozek but concluded their scope is narrow (where the differential treatment has the object and effect of remedying a prior inequality) and in any event Kleist restricts their application.

(iii) Method of equalisation: applying EU principles (Barber and the requirement of transparency/element‑by‑element comparison) and domestic law (EA 2010), the court described the "term by term" approach as generally appropriate but accepted that in complex scheme structures a global or consolidated approach can be lawful. It applied the subsidiary principle of minimum interference: where more than one lawful method achieves equality, trustees must adopt the method that involves the least substantive interference with other parties' rights. The court held Methods B and C are lawful, Methods A (in its most expansive forms) and D1 were rejected as incompatible with minimum interference (A as unduly costly to employers; D1 as impermissibly substituting actuarial re‑profiling for guaranteed contractual indexation). Method D2 (statutory GMP conversion) is lawful in principle but requires employer consent under the statutory scheme (sections 24A–24H PSA 1993) and so was not available absent that consent; the court held the GMP‑conversion legislation can operate in relation to survivors as well as earners.

(iv) Remedies and limitation: trustees must make back‑payments where underpayments occurred. Scheme rules providing for forfeiture/extinguishment of unclaimed pension instalments after six years are valid in form and will limit recovery under scheme rules in many cases; but a beneficiary's proprietary claim to trust property in the trustee's possession is not time‑barred by Limitation Act 1980 s 21(1)(b). The court held that the six‑year limitation in Equality Act 2010 s 134 cannot be used to deny such proprietary claims in a way inconsistent with the EU principle of equivalence. The court fixed simple interest on arrears at 1% above base rate.

Result / disposition

The court determined the principal issues: trustees are obliged to equalise and must adopt a method consistent with Article 157 and the EA 2010; Method C2 (year‑by‑year higher‑of with accumulated offsetting and allowance for time value of money) was held to be a lawful and, in the circumstances, the appropriate approach absent employer consent to statutory conversion (Method D2). The court also resolved key remedial questions on back‑payments, limitation and the rate of interest.

This first instance claim was determined by Morgan J. The court held that (i) the trustee is obliged to adjust non‑GMP scheme benefits to remedy sex discrimination caused by unequal GMPs accrued in the Barber window (17 May 1990–5 April 1997); (ii) benefits payable under the Schemes are "pay" within Article 157 TFEU and the domestic sex‑equality rule (EA 2010 s 67) applies; (iii) defences advanced by the Banks (state substitution, objective difference, material factor) do not justify unequal overall benefits; (iv) as to methods of equalisation, several methods are lawful but, applying the principle of minimum interference, the court rejected overly generous (Method A variants) and actuarial re‑profiling (Method D1) options and held that a year‑by‑year accumulated offsetting method with interest (Method C2) is a lawful and appropriate solution absent employer consent to GMP conversion under sections 24A–24H PSA 1993; (v) trustees must make back‑payments for underpaid pensions, scheme rules may limit claims after six years in form, but proprietary claims against a trustee in possession of trust assets are not time‑barred by Limitation Act 1980 s 21(1)(b), and EA 2010 s 134 cannot nullify such claims insofar as that would conflict with the EU principle of equivalence; simple interest on arrears was fixed at 1% above base rate. Rationale: application of Barber, Coloroll, Beune and related ECJ authorities; analysis of domestic implementing provisions; and balancing of transparency, practical administration and "minimum interference" with employers' and beneficiaries' rights.