The UK’s High Court has ruled that Lloyds Banking Group’s pension plans must equalize guaranteed minimum pensions for men and women in a closely watched case that the Pensions Management Institute estimates could cost providers £10 billion to £20 billion in payouts.
“This landmark judgment resolves this pension discrimination issue for good and will bring equality to millions of women across the country,” said Mark Brown, general secretary of BTU, the trade union representing Lloyds Banking Group staff. “It’s simply unacceptable that 48 years since the passing of the Equal Pay Act in 1970 we are still fighting for equal treatment in the workplace.
BTU estimates that up to 5 million participants, the vast majority of whom are women, in 6,000 private sector pension plans, will benefit from the High Court’s ruling.
The case involved three women—Angela Sharp, Judith Cain, and Susan Dixon–who were members of Lloyds Banking Group’s final salary pension plan, and who claimed they were discriminated against based on their gender because their pensions increased at a lower rate than male members of the pension.
At the crux of the case is how guaranteed minimum pensions are increased. Guaranteed minimum pensions were introduced in 1978 and allow employers that offered defined benefit plans to contract out their staff, and pay a reduced rate of National Insurance Contributions. In exchange for the lower rates, the companies promised that their pension would meet a minimum standard of benefits.
However, there have been complaints that guaranteed minimum pensions are inherently discriminatory because men and women accrue these at different rates, and they are entitled to them at different ages—60 for women and 65 for men.
“The trustee is under a duty to amend the schemes in order to equalize benefits for men and women so as to alter the result, which is at present produced in relation to GMPs,” said Justice Paul Morgan in his ruling, adding that “beneficiaries are entitled to receive arrears of payments due to them.”
The ruling directly affects the 230,000 members of Lloyds Banking Group’s pension plans, and could cost the company well over £100 million, according to BTU, with other estimates ranging as high as £150 million.
BTU said that the ruling has “major financial implications” for pensions, adding that “most of the FTSE 100 giants will have massive GMP liabilities, which could add millions to their burgeoning pension deficits.”
Tags: Gender Equality, Lloyds Banking Group, Pension, UK High Court