Lloyds Banking Group has begun its landmark defence in relation to the equalisation of guaranteed minimum pensions (GMPs).
The High Court case, which began yesterday, involves three female members of Lloyds Banking Group’s final salary pension schemes who are claiming sex discrimination because their GMPs increased at a lower rate than male members.
Should the bank lose the case it could face backdated benefit costs amounting to £508m.
The trade union BTU, which represents over 30,000 staff in the Lloyds Banking Group, said that the issue has wider implications for pension schemes that contracted out of the State Earnings Related Pension Scheme (SERPS) as they provide different benefits to male and female members.
It has estimated that if Lloyds were to lose the case then the cost of equalizing GMPs across the board could be as much as £20bn. The BTU has said that there are 6,000 contracted-out pension schemes in the UK with over 7.8 million members.
With the implications of the case for public policy being far-reaching, the Department of Work and Pensions and the Treasury have both joined the action and are making submissions on behalf of the government.
The BTU argues that GMPs are by their nature discriminatory between men and women because they accrue GMPs at different rates, are entitled to GMPs at different ages and are subject to different benefit increases in many cases than those found in non-GMP pensions.
GMPs were first introduced in 1978 as a means of allowing schemes, such as those run by Lloyds, to contract out of SERPS as long as they were as good as the statutory minimum amount.
Mark Brown, general secretary at the BTU, said that the case has profound implications for both public and private sector pension schemes.
“Up to five million women have either got or are going to get smaller pension increases than men and that is simply unacceptable,” he said.
“This issue has lurked in the long grass for years, kicked there by the pensions industry and Government hoping it would go away, and needs to be resolved once and for all.”