Lloyds Bank has launched a joint legal bid with its pension trustees and unions to equalise guaranteed minimum pensions (GMPs) in a move which could cost the industry £20bn.
The coalition is seeking to close an estimated £2,000 per year gap between men and women in the bank's three defined benefit (DB) schemes. This affects approximately 230,000 women who joined the 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, at age 60.
The claim, if successful, could cost Lloyds up to £508m, but consequently land the wider contracted-out DB sector with a £20bn bill.
The action was mooted by the Lloyds Trade Union last August, but now the union, trustees and bank have announced paperwork for the case which has been jointly filed with the High Court, with a trial expected later this year.
They are filing a ‘part 8 claim' to get a definitive ruling on whether there is an obligation for trustees to adjust benefits to ensure they are equal, if there is a correct method for doing this, and how the trustees should exercise their powers.
A Lloyds Banking Group spokesperson said: "This relates to a longstanding industry-wide issue about how differences between equality and pensions legislation impact occupational pension schemes. The group supports the trustee in seeking a resolution so that it can bring an end to decades of uncertainty and provide clarity to interested parties."
The issue has caused headaches for the industry since a 1990 judgement in the European Court of Justice said men and women should have the same retirement date for benefits.
Last year, the Department for Work and Pensions (DWP) proposed a method for GMP equalisation where a scheme does a one-off calculation to find whether a man or woman has the higher benefit, with the lower benefits then uprated. That GMP is then converted into an ordinary scheme benefit.
The Pensions and Lifetime Savings Association (PLSA) is in the process of convening an industry-wide group to take forward the work of the Institutional Disclosure Working Group (IDWG).
The Transfers and Re-registration Industry Group (TRIG) has given its support to an initiative which aims to complete occupational pension transfers within three weeks.
Scottish Widows has completed a bulk annuity deal for the Hitachi UK Limited Pension Scheme.