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Winding-up priority orders: "Barber" benefits
In July 2007, the Court of Appeal delivered their judgment in Cripps v Trustee Solutions Ltd & Dubery.
The appeal looked at the priority to be given on the winding-up of a defined benefit (DB) scheme to certain male members with “Barber window” benefits.
What is the “Barber window”?
In the 1990 Barber case, the European Court of Justice ruled that it was discriminatory for pension schemes to provide different retirement ages for men and women. The period between the date of the ruling and a scheme’s equalisation of benefits (during which benefits had to be provided on the more favourable basis, normally by uprating male benefits to provide benefits calculated by reference to retirement at age 60) is known as the “Barber window”.
Section 73 of the Pensions Act 1995 (which came into force on 6 April 1997) sets out the statutory priority order for paying benefits on the winding-up of a defined benefit scheme. At the relevant time, a member who had become entitled to his pension at the date of wind-up was given a higher priority in relation to available assets than a member who had not.
High Court decision
The High Court decided that men aged 60 plus with Barber window benefits (Male Members) had an entitlement on winding-up to all of their benefits from that age (and therefore fell in the top priority) even if they had not reached their scheme’s normal retirement date (in this case, 65).
Mrs Cripps (a deferred member appointed as a representative beneficiary) appealed the decision. Before the decision of the High Court, the Male Members would have fallen much further down the statutory priority order as they would have been considered deferred members rather than pensioners at the date of wind-up. Therefore, the High Court ruling would have cut back the amount of benefits Mrs Cripps (and other deferred members) would eventually receive.
Court of Appeal’s decision
The Court of Appeal decided that the Male Members’ service should be calculated on a split basis. Their Barber window benefits (and not all of their benefits) should fall within the top priority (as an entitlement arose as age 60). However, benefits accrued before and after the Barber window fell lower down the priority order (with those of the other deferred members).
Author: Georgina Jones