Safeway Ltd v Andrew Richard Newton and Safeway Pension Trustees Ltd
By way of providing some background to this case, in Barber v Guardian Royal Exchange, almost 30 years ago, the Court of Justice of the European Union (CJEU) held that pension benefits were classified as 'pay'. This meant that equal pay provisions applied to pensions. Thus fixing a NPA (Normal Pension Age) which differed by gender was discrimination. Following on, from this decision, pension providers required to make the retirement age the same for men and women.
A full host of case law helped guide how schemes should do this to comply with legislation and prevent discrimination. Schemes were advised to ‘level up’, meaning the NPA was moved to the more favourable age (in our case women at 60 years old). Once an equal NPA had been achieved, the age could be increased.
Given the inevitable amount of administration after this decision, schemes did not change the NPA straight away resulting in an opening where the NPA remained different. This is known as the 'Barber Window.
The Safeway pension scheme had a NPA of 60 for women and 65 for men. Safeway issued a written announcement in July 1991 advising that from December 1991 the pension age for both sexes had been set at 65. Safeway argued this was sufficient to confirm 'equalisation' of the NPA, even though a written deed did not implement the change until 02 May 1996. Their reason for this was that the Scheme’s power of amendment allowed changes to take effect from the date specified in the deed, even if the effective date of the changes was prior to the date of the deed itself. Thus the Scheme was administered as if benefits were equalised on December 1, 1991.
The Courts were asked to determine if the benefits were equalised as of December 1991 or May 1996.
The High Court held that the announcement was not sufficient to change the NPA to 65 for women. Changes had to be made to the deed first, creating a Barber Window of almost six years. It also held that retroactive ‘levelling down’ was prohibited (meaning that it was against EU law to raise the female retirement age to equal that of the males). Usual practice was to level up to more favourable retirement age, which was usually that of the females.
The decision was passed on to the higher Court of Appeal. They decided that the earlier written announcement was in place and the scheme rules allowed the written deed to apply the change at any point. The Court of Appeal wanted clarification as to whether levelling down was compliant with EU Law.
Decision of the Court
The court decided that even where the rules of a pension scheme permit retroactive levelling down, EU law still prohibits it.
In their full judgement, the Court of Justice concluded that the written announcement was not fully binding. The Court focused on legal certainty of EU law and that people should know their rights and obligations in advance. This meant that changing the NPA with retroactive effect was against EU Law. However, the court did say that under exceptional circumstances it may be allowed, if there is an overriding public interest reason.
Whilst the Court of Justice have answered the referring question, it is for the referring court to decide if increasing the NPA could be justified. It remains to be seen if the equalisation of the age to the less favourable position was necessary to prevent the financial balance of the scheme being seriously undermined.
For information and help on any of the matters raised in this article please speak to a member of our Dispute Resolution Team. Thanks to Andrew Shaw, our trainee solicitor, for input into this article.