Pensions Insight: 7 to 13 May 2024

In a relatively quiet week for pensions, we cover just two items in this insight – a recent Pensions Ombudsman determination on equalisation and section 67, and the National Audit Office (NAO) report on the delivery of pensions dashboards.

TPO equalisation determination – retrospective closure of the Barber Window valid

At the time of writing, we are nearing the 34th anniversary of the 17 May 1990 Barber v Guardian Royal Exchange decision that occupational pension schemes must provide equalised benefits for periods of service on and after 17 May 1990. Over three decades since Barber, occupational pension schemes are still grappling with the effect of the judgment as demonstrated in the recent TPO case of Mrs E in which TPO found that a retrospective rule amendment changing females’ normal retirement date (NRD) from 60 to 65 for pre-17 May 1990 service was valid.

Effect of Barber

Schemes do not have to provide equalised benefits in respect of service before 17 May 1990 but must do so after this date. Schemes that provide unequal benefits, typically through having a NRD of 65 for men and 60 for women, must ‘level up’ benefits between 17 May 1990 and the date that the rules are validly amended to stop any discriminatory practice between sexes – referred to as closing the Barber Window. Levelling up involves treating the disadvantaged sex in the same way as the favoured sex (so NRD of 60 for both). Benefits in respect of the period after a valid rule amendment can be provided on an equalised basis through ‘levelling down’ – this means that a NRD of 65 for both men and women can be applied.

How did the scheme in the case equalise benefits?

The scheme amended its rules on 23 November 1992 to close the ‘Barber Window’ and equalise male and female scheme members’ normal retirement date (NRD) to 65 from that date. The way the change was made meant that female members’ NRD was also retrospectively increased from 60 to 65 for all pre-17 May 1990 service.

Mrs E’s arguments

Mrs E argued that her pre-17 May 1990 benefits should be based on NRD 60 not 65 – the 1992 rule change was invalid. She based her arguments partly on section 67 of the Pensions Act. This provision prevents detrimental modifications being made to benefits that have built up in the past unless certain conditions are met. Mrs E said that section 67 required members to have consented to the 1992 amendment because it adversely affected relevant members’ benefits and members did not do so – therefore, the change was invalid.

TPO decision

TPO determined that the November 1992 amendment was valid because:

• the amendment power allowed retrospective alterations to be made;
• it did not prevent adverse changes to accrued benefits; and
• section 67 did not come into effect until 6 April 1997 and so was not in force in 1992 when the scheme rule changes were made. It is not retrospective and so was not relevant to Mrs E.

TPO was therefore satisfied that the rules allowed the trustee to retrospectively equalise members’ pre-17 May 1990 NRD to age 65 when it did so in 1992. The trustee had the power until 6 April 1997 to make retrospective (and adverse) changes to female members’ pre-17 May 1990 NRD. After this date it would have required member consent under section 67 to do so.

Comment

This case is an interesting one given it centres around what is permissible as regards equalisation before the date of the Barber judgment and the interaction of section 67. However, it is confined to itself and its facts and will have limited application to other schemes.

NAO report on Pensions Dashboards Programme reveals 23% cost increase

The National Audit Office’s report into the delivery of the Pensions Dashboards Programme since 2019 notes that estimated costs have gone up by 23% from £235m in 2020 to £289m in 2023. The estimated gross benefits of the programme have decreased from £437m in 2022 to £413m in 2023. The NAO refers to delays caused by digital capacity and capability issues and references that no date has yet been set for dashboards to be made available to the public. “DWP and MaPS must continue to work closely to ensure the final stages of the PDP are delivered smoothly and the public can begin to have access to this important service.”