Lloyds has lost a landmark High Court case after it ruled that it must now equalise pensions benefits for men and women in what could have huge consequences for thousands of companies.
Mr Justice Morgan ruled today, 26 October, that Lloyds must start the process of equalising the benefits in relation to the guaranteed minimum pension (GMP), which could cost the bank up to £150m.
The ruling was delivered after a two-week trial in July, after three female members of Lloyds Banking Group’s final salary pension schemes claimed sex discrimination because their GMPs increased at a lower rate than male members.
“The trustee is under a duty to amend the schemes in order to equalise benefits for men and women so as to alter the result which is at present produced in relation to GMPs,” the judge ruled.
It was originally thought that the ruling would cost up to £500m, however the judge narrowed down the methodologies used to calculate the equalisation, meaning it will now cost Lloyds between £100-£150m.
It is thought that the decision could have far reaching consequences after the cost of equalising GMPs across the board could be as much as £20bn.
According to trade union BTU, which represents over 30,000 Lloyds Banking Group staff, there are around 6,000 contracted-out pension schemes in the UK with over 7.8 million members.
The Department of Work and Pensions and the Treasury have both joined the action and are making submissions on behalf of the government due to the scope in which it could affect public sector pensions.
GMPs were first introduced in 1978 as a means of allowing schemes, such as those run by Lloyds, to contract out of State Earnings Related Pension Schemes (SERPS) as long as they were as good as the statutory minimum amount, which under current rules are allowed to be calculated differently for men and women.
The judgement provides clarity on the issue which arose in 1990 from the Barber Case in which the decision was made that men and women must be treated “equally in relation to benefits under an occupational pension scheme”.
A Lloyds spokesperson said: "The hearing focused on what is a complex and longstanding industry-wide issue. The group welcomes the decision made by the court and the clarity it provides. The group and the pension scheme trustee will be working through the details in order to implement the court's decision."
The decision has not come as a surprise to many in the industry and Equiniti operations director for data solutions, Stewart Winter, has called on companies to act quickly.
“Today’s judgment should not come as a surprise to any of the schemes affected by the ruling – they have had plenty of time to get their house in order regarding the complex issue of GMP equalisation,” he said.
“For instance, companies have been able to forecast how many pension members would be due an uplift in payments and the proportion of members this represents so that they were in the best position ahead of the ruling.”
Despite this, Royal London director of policy Steve Webb said that the complexity of the case means that "members will not be receiving cheques any time soon”.