In the second part of the most important pension case in 30 years, the High Court has ruled today that the Lloyds Banking Group pension schemes are legally responsible for equalising the guaranteed minimum pensions (GMPs) for those men and women who transferred out of one of the defined benefit pension schemes. The Trustee must start remedying that position now.
Members will recall that in the first case in 2018, the High Court ruled that the Trustee of the Lloyds pension schemes is under an obligation to equalise the benefits of male and female members to address the effect of unequal GMPs.
Who Will Benefit From Our Victory?
Of the 200 transfers looked at by the High Court, the average top-up payment required to equalise GMPs was £1,000, with one member of staff entitled to £23,000.
In Lloyds we know that thousands of staff took advantage of the pension freedoms introduced in 2015 and transferred their pensions out. We estimate that at least £2bn has been transferred out of the Lloyds DB schemes over the last few years. It’s difficult to get exact data but according to the Pensions Regulator between 2018/19 approximately 210,000 individuals transferred out of defined benefit pension schemes. The total value of those transfers is estimated at approximately £34bn. In 2017/18 there were 100,000 transfers with a total value of £14.3bn.
Most of those individuals who transferred out of defined benefit pension schemes will now benefit from the outcome of our High Court legal victory.
The Legal Background
In our latest, landmark legal case, Mr Justice Morgan was asked to turn his attention to those members who have transferred out of, or into, one of the Lloyds defined benefit (final salary) pension schemes. The Court was asked to determine who is responsible for paying unequal GMP benefits: the scheme from which the pension came or the receiving scheme.
If a member leaves a pension scheme and transfers his or her benefits to another pension arrangement, the Scheme actuary calculates the capital value of the pension that the member will be paid at normal retirement age, making actuarial assumptions about the revaluation of the pension between the transfer date and normal pension age, pension increases that will be paid after normal pension age, and the life expectancy of the member concerned. This stream of anticipated future payments is then discounted back to a current date to give a capital value, usually called a cash equivalent transfer value or CETV.
If the starting value of the pension is wrong, the capital value will be wrong. The bank admitted that it did not equalise CETVs, although we now know that they should have done so since 17 May 1990.
The High Court was asked to answer the following issues:
- whether the Trustee needs to remedy the position now;
- if so, how should it do so;
- if a member transfers out his or her excess over GMP but leaves the GMP in one of the Lloyds schemes, how does that affect the equalisation obligation;
- if the receiving scheme also has an equalisation obligation, how do the two obligations interact;
- if the Trustee is obliged to equalise, is the obligation discharged by any of the pension legislation or any of the transfer forms that members signed; and
- what time limits are applicable to any claim?
We will be poring over the judgement with our lawyers in the next few days and further Newsletters will follow.
Walking The Walk
Let’s be clear, had we succumbed to the Bank’s bullying and jettisoned our principles for a seat at the ‘negotiating’ table in 2012 we would not have been able to pursue this case on behalf of all pension scheme members. The Bank’s two in-house staff Unions – Accord and Unite – talk the talk but when it comes to doing the real job of protecting the interests of staff they are simply not capable of doing what’s necessary. Naively they believe that being the bank’s best friend will benefit their members – it won’t.
The old approach to collective bargaining, which was simply about controlling staff and securing union legitimacy, is dead but no one’s told Accord and Unite. The power dynamic has now shifted and it’s all about connective action, which means using customers, the courts, regulators, politicians and media to further the interests of staff. That’s what we will continue to do.
Further guidance on the next steps in this case will follow in the next few weeks. In the meantime, members with any questions on this Newsletter can contact the Union on 01234 262868 (Choose Option 1).