Safeway Ltd v Newton and another [2016] EWHC 377 (Ch)

The equalisation of retirement ages between men and women continues to cause problems for occupational pension schemes.

Background

In 1990 the European Court of Justice (ECJ) in Barber v Guardian Royal Exchange confirmed that the principle that men and women should receive equal pay for equal work was applicable to pension benefits. Later ECJ decisions determined that where pension benefits were not equal then the benefits of the disadvantaged sex should be "levelled up" to those of the advantaged sex in respect of service from 17 May 1990 (the date of Barber) to the date of the amendment of the pension scheme rules to equalise benefits. This is known as the "Barber Window" and, depending on its length, has considerable impact on the liabilities of pension schemes.

Facts of the case

In September 1991 Safeway issued a written announcement to members of the Safeway Pension Scheme stating that normal retirement age would be equalised at 65 for men and women from 1 December 1991. Previously the normal retirement age was 65 for men and 60 for women. This announcement was followed by a letter sent to members on 1 December 1991 confirming that the change had taken effect.

The Scheme rules contained a power of amendment which allowed the trustees to amend the rules “so as to take effect from a date specified in the Supplemental Deed which may be the date of such Deed or the date of any prior written announcement to Members of the alteration or addition.”

A Deed of Amendment concerning equalisation was not executed until 2 May 1996.

The key questions for the court were as follows: (1) whether equalisation had taken place on 1 December 1991 (the date of the announcement to members) or 2 May 1996 (the date of the deed of amendment); and (2) if it was the later date, whether the retrospective amendment under the 2 May 1996 deed was permissible under EU law.

Safeway argued that the 1991 announcement and letter to members were effective in equalising benefits from 1 December 1991, relying on the power of amendment referred to above, which expressly refers to “written announcements” to members.

Mr Newton, who acted as a Representative Beneficiary on behalf of affected members, argued that equalisation only occurred on 2 May 1996 when the deed of amendment was executed.

The Court’s decision

Mr Justice Warren accepted Mr Newton’s argument and rejected Safeway’s position – the 1991 announcement and letter were not sufficient to effect equalisation, a deed of amendment was required which in this instance meant that equalisation did not occur until 2 May 1996. Warren J applied his own judgment in the case of Harland & Wolff Pension Trustees Ltd v Aon (2006) which also considered express powers of retrospective amendment in pension scheme rules. It should be noted that it was theoretically permissible, under English law and under the scheme rules, for Safeway to apply a normal retirement age of 60 before 2 May 1996 (thus fulfilling EU law by only "levelling up" benefits retrospectively) and then immediately increasing normal retirement age to 65 for both men and women for the same time period, which was otherwise allowed by the rules of the Scheme. However, this was rejected as a “purely artificial” attempt to make changes in two steps which could not lawfully be made using a single step which was contrary to EU law because it effectively increased normal retirement age for women to age 65.

Safeway also argued that section 62 of the Pensions Act 1995 (a) allowed for the 1996 deed of amendment to have retrospective effect, equalising benefits in 1991; and (b) in any event, the legislation automatically served to equalise benefits under English law, in compliance with European law from 1 January 1996. Warren J dismissed these arguments holding that section 62 did not properly implement the European law equalisation requirements from 1 January 1996. It was pointed out that if these arguments were sustained, it would effectively lead to the “levelling down” of female benefits during the relevant Barber Window, which was not compatible with European law.

Our comment

This case is another example of the issues, and the significant financial liability (reportedly around £100m in this instance), arising from the failure to properly equalise benefits in the early 1990s. The judgment follows previous High Court decisions and offers no surprises in the Court’s reasoning. Permission to appeal has been granted so it remains to be seen whether the judgment, or elements of it, may be overturned by the Court of Appeal.