CJEU rules that pension scheme benefits cannot be levelled down retroactively in order to comply with non-discrimination laws
The case concerns the equalisation of pension rights under an occupational pension scheme following the European Court of Justice’s decision in Barber v Guardian Royal Exchange on 17 May 1990.
The relevant scheme’s power of amendment allowed Safeway, with the consent of the trustees, to amend the trust deed and rules by way of a deed executed by both parties. The power of amendment further provided that any such amendment could take effect from the date of any prior written announcement to members.
Following the Barber decision, in line with the power of amendment, Safeway announced on 1 December 1991 that with effect from that date, the Normal Pension Ages (NPAs) under the scheme would be equalised at 65 for both men and women. This amendment was then formally documented in a deed executed on 2 May 1996 which provided for the retroactive increase of NPAs to age 65 with effect from the date of the 1991 announcement.
The question before the domestic courts and, eventually, the Court of Justice of the European Union (CJEU), was whether the purported amendment to the scheme’s rules to equalise NPAs took effect from 1 December 1991 (the date of the announcement) or on 2 May 1996 (the date a formal deed was executed to change NPAs to age 65).
In 2016, the High Court held that the December 1991 announcement was not sufficient to equalise NPAs and that the “Barber window” had therefore remained open from 17 May 1990 until 2 May 1996 when the formal deed was executed. Following existing case law, Warren J held that EU law prohibited the retroactive levelling-down of pension rights, even if such levelling-down was allowed by domestic law and by the deed and rules of a particular pension scheme.
On appeal, the Court of Appeal was of the view that the female members’ right to an NPA of 60 for the period between 1 December 1991 and 2 May 1996 was “defeasible” as the 1991 announcement increasing NPAs to 65 had been in place during this period and could be implemented at any time retrospectively by a deed of amendment. The Court of Appeal however made a referral to the CJEU on whether retroactive levelling-down of NPAs was prohibited under EU law even if this was allowed by domestic law and the governing documentation of a pension scheme.
In line with the reasoning adopted by the Advocate General in his opinion published earlier this year, the CJEU rejected the Court of Appeal’s “defeasibility” analysis and emphasised the importance of legal certainty. It held that the expectation was that EU law would be implemented in a way which was “sufficiently precise, clear and foreseeable to enable the persons concerned to know precisely their rights and their obligations”. In the CJEU’s opinion, legal certainty therefore precluded the implementation of EU law with retroactive effect even where domestic law or a pension scheme’s rules provided for this. The CJEU agreed with the earlier High Court decision and held that the “Barber window” remained open until the formal deed of amendment was executed on 2 May 1996.
The CJEU however states in its judgement that, measures seeking to end discrimination contrary to EU law may, exceptionally, be adopted with retroactive effect so long as an overriding reason in the public interest requires this and the legitimate expectations of those concerned are duly respected. In particular, the CJEU notes that the risk of seriously undermining the financial balance of a pension scheme concerned may constitute such an overriding reason in the public interest.
On the facts before it, the CJEU was not able to conclude on whether the public interest test was met. The CJEU however leaves it open for the Court of Appeal to carry out the necessary analysis on whether the facts of this particular case meet such requirements.
The CJEU has confirmed the position that it is not possible to retroactively implement EU law in the context of equalising pension scheme benefits even under a power of amendment that expressly provides for retrospection from the date of a member announcement. It has also provided for a public interest exception. It remains to be seen how the Court of Appeal approaches the public interest exception in the context of the scheme in question. The Court of Appeal’s decision may yet provide flexibility for the Safeway scheme (and other schemes that find themselves in a similar situation).