A potentially landmark case has been launched in the High Court as Lloyds Bank seeks guidance on how to address equalisation of guaranteed minimum pensions (GMPs).
A coalition involving the bank, its union, and its pension trustees have today (5 July) begun a ‘part eight claim' seeking input on whether the trustees need to equalise how GMPs are treated and, if so, whether there is a certain way this must be done or if it is a trustee discretion.
The case, which is being heard by Justice Morgan, is expected to run for two weeks and is likely to provide answers to what many in the pensions industry have found to be a thorny issue.
For Lloyds in particular, if the High Court does find GMPs need to be equalised, the cost is expected to be around £508m, but the wider contracted-out defined benefit (DB) sector could face a bill of £20bn.
Around 230,000 women at the bank are estimated to be impacted by a roughly £2,000 per year gap between men and women; these are members who joined its schemes between 1978 and 1997 and substituted their state pension for a higher private pension.
At the time, GMPs were calculated based on women receiving their state pension five years earlier than men.
In a communication to members ahead of the case, trustee Richard Conway explained why they were seeking High Court input.
"We thought it was such an important thing that we should get clarity but we know that it's a generic issue that will affect potentially many other pension schemes in the industry," he said. "So we're expecting there'll be quite a lot of interest from other schemes as to this ruling. How those schemes implement it is up to them. Obviously, the ruling will come down for our Schemes, so we will comply with whatever the judgements are. We think it's likely to be of great interest to other schemes."
The trustees expect a judgment before the end of the year.
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