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.
Last week, both the PLSA's new chairman Richard Butcher and the pensions minister Guy Opperman told the industry exactly what they wanted to hear. The hard part, as Jonathan Stapleton writes, is turning these fine words into action.
The UK's ranking has dropped to 15 in the Melbourne Mercer Global Pension Index (MMGPI) despite the country attaining a better score than last year.
Origo has appointed Aviva head of proposition Anthony Rafferty to succeed Paul Pettitt as managing director from 1 March 2018.
Baroness Ros Altmann has attacked the annuity market for failing to inform savers that better annuity rates may be available to them, calling for an investigation.