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Prior to 1990 it was a common design feature of pension schemes that normal retirement ages were based on gender, typically 65 for male and 60 for female members. In Barber v Guardian Royal Exchange the European Court of Justice (ECJ) held that pension benefits were “pay” and therefore the equal pay provisions of the Treaty of Rome applied to them. This meant that it was discriminatory for schemes to provide different retirement ages for men and women.
Subsequent ECJ decisions made it clear that, while schemes could increase retirement ages going forward, in the interim, benefits had to be provided on the more favourable basis (typically by reference to a normal retirement age of 60). The period between the date of the Barber decision (17 May 1990) and a valid rule amendment to equalise benefits is known as the “Barber window”.
Why is Barber relevant now?
We are seeing more and more cases concerning the way in which schemes were equalised. The issue often arises when a scheme goes into wind-up and the trustees are verifying the benefits to be paid.
Typical examples of the kinds of problem that have arisen in practice are as follows:
- the power of amendment was not followed correctly;
- a retrospective amendment was made (this is not lawful); and
- the necessary documents were not validly executed.
Where schemes have failed to equalise benefits properly the Barber window has not been closed (or has been closed later than assumed), resulting in a greater liability in the pension scheme.