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

A trustee that makes an inadequate statutory transfer payment remains liable to make good the shortfall where the cash equivalent was wrongly calculated by omitting benefits required for equalisation. The statutory discharge arises only after the trustee has done what is needed to transfer the correctly calculated cash equivalent.

A wrongly calculated statement of entitlement under the post-1997 regime remains valid but may be corrected before or after payment. The trustee’s breach occurs when the inadequate transfer is made. A member may seek an order requiring a belated top-up payment, with interest at 1% above base rate. The claim is not defeated by the relevant scheme forfeiture rules or limitation provisions.

The claimant trustee sought declarations concerning inadequate transfers from defined benefit pension schemes. The transfers had failed to reflect the trustee’s obligation to equalise benefits for male and female members in respect of unequal guaranteed minimum pensions.

The court considered transfers made under the cash equivalent legislation, bulk transfers under the preservation of benefit legislation, and individual rule-based transfers. It also considered statutory discharges, actuarial certifications, scheme rules, member release forms, limitation, forfeiture, interest, and the effect of Coloroll Pension Trustees Ltd v Russell [1995] ICR 179.

1. The claim was determined by reference principally to domestic pension legislation and the scheme rules. For transfers under the cash equivalent legislation, the trustee was required to calculate and transfer the cash equivalent of the member’s accrued benefits, including the increase required for equalisation.
2. For transfers made from 1990 to 1997, an inadequate payment constituted a breach of the trustee’s duty under sections 94, 95 and 99 of the Pension Schemes Act 1993. Section 99 did not discharge the trustee unless it had transferred the correctly calculated cash equivalent.
3. For transfers from 1997 onwards, regulation 9(5) of the Occupational Pension Schemes (Transfer Values) Regulations 1996 required the guaranteed cash equivalent to be increased to the amount properly calculated under the legislation. The trustee’s obligation continued until payment, and the member could obtain an order requiring a belated recalculation and top-up.
4. Regulation 4(4) of the 1985 Regulations and regulations 10(1) and 10(2) of the 1996 Regulations concerned delay in making a transfer, not a prompt but inadequate payment. They therefore did not apply. Interest was nevertheless payable at 1% above base rate.
5. The trustee had no choice between a top-up payment and a residual benefit. The normal remedy was a top-up payment to the receiving scheme. The court left unresolved the appropriate solution where the member had subsequently left the receiving scheme or the receiving scheme would not accept payment.
6. Mirror-image bulk transfers complying with section 73 of the Pension Schemes Act 1993 and regulation 12 of the 1991 Regulations discharged the transferring scheme’s obligations. Individual rule-based transfers were effective unless and until a court set aside the relevant decision for breach of duty.
7. None of the five sample forms discharged the trustee from liability to make a top-up payment. The relevant rights were statutory transfer rights, not benefits under the transferring scheme. The claim was not forfeited under the scheme rules and was not time-barred under the Limitation Act 1980.
8. Coloroll Pension Trustees Ltd v Russell [1995] ICR 179 did not release the transferring scheme from liability under EU law. The transferring and receiving schemes could owe concurrent obligations.