The latest round of litigation involving the Safeway Pension Scheme (the Scheme), which formed part of an appeal from an order made in February 2016, has seen the Court of Appeal add to existing jurisprudence on the efficacy of attempts to equalise male and female Normal Pension Ages (NPA) under an occupational pension scheme. At the heart of the case was the effect of the coming into force of section 62 of the Pensions Act 1995 (Section 62) on 1 January 1996.
In Safeway Limited v Andrew Newton and Safeway Pension Trustees Limited the Court of Appeal allowed an appeal by Safeway Limited (Safeway). It ruled that the coming into force of Section 62 had equalised NPA under the Scheme and that NPA had been equalised at age 65 retrospectively, five months before the deed making the amendment had been signed.
Safeway Limited v Andrew Newton and Safeway Pension Trustees Limited
As is very well-known, on 17 May 1990 the European Court of Justice ruled in Barber that pension benefits amounted to "pay" for the purposes of Article 119 and that it was unlawful for schemes to have unequal male and female NPA.
The effect of Barber and subsequent cases was that, until measures had been taken to equalise NPA, men and women accrued benefits on the basis of the advantaged sex, which usually meant men accrued benefits on the basis of women's NPA, usually 60. The period from 17 May 1990 until NRA had been equalised is known as the "Barber window".
Many pension schemes came unstuck because steps they had taken to seek to close the Barber window, for example, relying only on member announcements and/or executing a deed years after the intended equalisation date but with purported retrospective effect, were ineffective because of the scheme's amendment power or section 67 of the Pensions Act 1995.
The attempt to equalise male and female NPA under the Scheme has been the subject of high-profile litigation since 2016, involving numerous trips to the European Court of Justice, the High Court and the Court of Appeal. This most recent judgment of the Court of Appeal determined the final issue in relation to the attempted equalisation of NPA under the Scheme.
Broadly, the Scheme's amendment power provided that its governing documentation could be amended by a deed executed by Safeway and the Trustees. That amendment would take effect from a date specified in the deed "or the date of any prior written announcement to Members of the alteration or addition or a date occurring at any reasonable time previous or subsequent to the date of such Deed."
By an announcement issued on 1 December 1991 (the 1991 Announcement) Safeway announced the introduction of a single male and female NPA of 65. However, the change was not included in the Scheme's formal documentation until a deed dated 2 May 1996 (the 1996 Deed).
Previous trips to the courts had resulted in decisions that the 1991 Announcement had not been effective to amend the Scheme's rules because the amendment power required a deed and that the 1996 Deed had not been effective to amend NPA to 65 retrospectively from 1 December 1991.
There were two issues for the Court to determine in this latest round of litigation. First, was the coming into force of Section 62 on 1 January 1996 an "effective measure" implementing Article 119 with respect to future pensionable service and equalising male and female NPA at 60? Secondly, was the 1996 Deed effective to change NRAs to 65 retrospectively from 1 January 1996 when Section 62 came into force?
If, as Safeway contended, the answer to these questions was Yes, then the Barber window would have closed on 1 January 1996, not 2 May 1996 when the 1996 Deed was executed, narrowing the window by five months.
The Court of Appeal decided that the coming into force of Section 62 was effective to modify the Scheme and so was an "effective measure" to equalise NRA at 60. This was because the effect of Section 62 was to deem the Scheme to be amended by the inclusion of an equal treatment rule. In reaching this decision, the Court of Appeal rejected the argument that nothing apart from a textual amendment of the Scheme was sufficient to close the Barber window, concluding that it made no difference if the amendment were initiated by Parliament or the Scheme's administrators.
Accordingly, the Barber window had closed on 1 January 1996. That having been done, domestic law "took over" (as Safeway had contended) and the 1996 Deed took effect retrospectively to equalise NPA as permitted by the amendment power, albeit from 1 January 1996 not 1 December 1991 as had been intended.
Before the decision of the Court of Appeal it might have been considered that the 1996 Deed operated only prospectively from 2 May 1996. However, we now know that the equalising amendment took effect retrospectively from 1 January 1996.
The effect of the decision was that Safeway avoided the worst case scenario, namely, that the Barber window had not been closed until the date on which the 1996 Deed had been executed (2 May 1996). Although the difference between 1 January 1996 and 2 May 1996 might seem short in the context of a 5 year window, it is likely to have represented a significant costs saving given the total unintended liabilities for the period 17 May 1990 to 2 May 1996 had been estimated at over £100 million.
Might the decision of the Court of Appeal be relevant for other pension schemes?
There were two factors in Safeway which enabled the Court of Appeal to reach the conclusion it did. First, the Scheme's power of amendment expressly permitted retrospective amendments. Not every scheme does this. Secondly, the purported amendment pre-dated the coming into force of section 67 of the Pensions Act 1995, 6 April 1997.
Where a scheme contains an amendment power which expressly permits retrospective amendments and where the instrument purporting to effect the retrospective amendment was executed after 1 January 1996 (but before 6 April 1997), Safeway might be of interest because before the Court of Appeal's decision it might have been concluded that the amending instrument took effect prospectively only and had no retrospective effect. Whether it is worth pursuing further will no doubt depend on the scale of the financial benefits enjoyed because of this narrowing of the Barber window.