Incorrect equalisation of normal retirement ages
Mrs C Brand v Skipton Pension Trustees Ltd1
Mrs Brand (Mrs B) retired at age 62 in 2004 and immediately started to receive a normal retirement pension from the Sequence (UK) Ltd Staff Pension Scheme. Whilst an active member, she received benefit statements from 1996 to 2004 which showed that her normal retirement date (NRD) under the scheme was age 60 for pensionable service completed before 1 October 1996 and age 62 from that date. Prior to taking normal retirement, she had also requested estimates of her pension at ages 60, 61 and 62.
After seven and a half years of pension payments, the trustee wrote to explain that her NRD under the scheme was in fact age 65 and had been so since 1993. The trustee did not propose to recover the overpayment of pension, but would reduce her pension by approximately £1,600 per annum from 1 December 2011. Mrs B complained to the Pensions Ombudsman.
Amendments to equalise retirement ages
In 1991 the trustee passed a resolution amending the rules so that NRD for men and women was age 65 with effect from 1 April 1990. Prior to that date, women had been able to take normal retirement at age 60; men at age 65. Following the European case of Barber v Royal Exchange Assurance Group2, it is not possible to equalise different retirement ages for men and women retrospectively in this way. The trustee accepted therefore that this resolution was invalid.
In 1993, the trustee adopted new scheme rules which purported to come into effect in 1988, which specified that the NRD for those in pensionable service from 1 April 1990 would be age 65. The trustee accepted that the purported amendments could not have retrospective effect but argued that its resolution was effective to raise Mrs B’s NRD with effect from the date of the 1993 amendment, hence its assessment that her NRD was 65.
In 1997 the trustee amended the Rules, this time with effect from 1 October 1996, reducing the NRD for all members to age 62. For female members who joined before 1 April 1990, the pension age was 60 for pensionable service completed prior to 1 October 1996 and age 62 from that date. The 1998 scheme booklet reflected this amendment. The trustee argued that the 1997 amendment was invalid as there was no record of the company having given its consent.
In 2000, the company’s pension manager sent an announcement to all members explaining that the company and the trustee had agreed to introduce a late retirement rule enabling members to continue to work beyond their 62nd birthday.
The Deputy Pensions Ombudsman side-stepped making a decision on the question of the validity of the 1993 resolution, because as it had the potential to affect the interests of third parties who were not represented, she was precluded by previous case law from commenting on it.
Instead, the focus was on whether representations made over a considerable period to Mrs B by the trustee meant that the trustee was prevented (by the legal principles of estoppel by representation) to reduce her pension in payment.
The Ombudsman concluded that clear unequivocal representations had been made to Mrs B by the trustees over the years that were a significant factor that Mrs B took into account when making her retirement plans and acting as she did. Mrs B said she would have worked until age 65 had she known that her NRD was 65 and the trustee did not challenge this. The Ombudsman found that it would be unconscionable to allow the trustee to go back on those representations, even though the trustee pointed out that Mrs B had failed to provide evidence to prove she would have continued working.
Mrs B was therefore entitled to have her pension calculated on the basis that her NRD was age 60 for pensionable service completed before 1 October 1996 and age 62 from that date, together with appropriate increases. The trustee was also ordered to pay, within 28 days, the shortfall of pension received from 1 December 2011 to the date of the reinstatement of her full pension, together with interest and £150 for inconvenience.
This is an intriguing case. The amendments to the rules to address the equalisation of retirement ages appear to have lurched from one problem to another. Based on the limited information in the determination itself, it is not clear whether a Court would necessarily reach the same conclusions alluded to by the Ombudsman relating to the validity of the 1993 resolution when compared to the 1997 rule amendments. There must now be many other members of this scheme who have had their pensions reduced who may bring a similar claim.
Did you know?
For an “Estoppel by representation” defence to succeed, all the following boxes need to be ticked:
- a clear representation or promise made to the member
- reasonably foreseeable that the member would act on that representation/promise
- member needs to act upon the representation/promise
- after the act has been taken, the member needs to show that they will suffer detriment if the person who made the representation/promise is not held to it