In October 2017, the Court of Appeal referred a question to the CJEU regarding a scheme’s ability to equalise its retirement ages retrospectively.
The CJEU has followed the Advocate General’s earlier opinion, concluding that, in the absence of an objective justification, the prohibition under EU law on retroactive levelling down applies even when the rules of a pension scheme permit retrospective amendment (as they did in this case).
In Barber v Guardian Royal Exchange, the CJEU held that pension benefits were “pay” and therefore the equal pay provisions in Article 119 of the Treaty of Rome (now Article 157 of the Treaty on the Functioning of the European Union) applied to them. This meant that it was discriminatory for schemes to provide different retirement ages for men and women. Trustees and employers were therefore required to take steps to equalise retirement ages.
A series of judgments from 1994 made it clear, among other things, that:
Safeway, the Scheme’s principal employer, argued that the Scheme had equalised retirement ages on 1 December 1991 as this was the date on which scheme members had been sent a letter notifying them of the change. However, a formal deed of amendment (which purported to make the change effective retrospectively on and from 1 December 1991) was not entered into until 2 May 1996.
The Scheme’s power of amendment provided for changes to the rules to be made by Supplemental Deed, which could “take effect from a date specified in the Supplemental Deed which may be the date of such Deed or the date of any prior written announcement to Members of the alteration or addition or a date occurring at any reasonable time previous or subsequent to the date of such Deed so as to give the amendment or addition retrospective or future effect as the case may be.”
The Scheme has been administered on the basis that retirement ages were equalised on 1 December 1991.
Safeway appealed the High Court’s decision that equalisation was only valid from the date of the deed of amendment and that it was not possible for the deed to have retrospective effect.
The Court of Appeal was satisfied that any amendment to the Scheme had to be made by deed (ie the Scheme’s retirement ages were not equalised by the letter to members). However, it was not certain whether the ability to make retrospective changes under the Scheme’s amendment power enabled it to equalise retrospectively. Deciding that there was sufficient uncertainty as to whether a retrospective amendment would be prohibited by EU law, even where it was permitted by domestic law further to a power in the scheme’s rules, the Court of Appeal referred the question to the CJEU.
In March 2019, the Advocate General concluded that the EU prohibition on retroactive levelling down applied even when the rules of a pension scheme confer a power, as a matter of domestic law, permitting adverse changes to be made to members’ benefits retrospectively between the date on which the changes are announced and the date the scheme is actually amended. In his view, it “[made] no sense” to construe EU case law restrictively to preclude retroactive levelling down only where this is also impermissible under Member State law.
The CJEU agreed with the Advocate General, noting that, “above all […] any measure seeking to eliminate discrimination contrary to EU law constitutes an implementation of EU law, which must observe its requirements. In particular, neither national law nor the provisions of the Trust Deed governing the pension scheme concerned can be relied upon in order to circumvent those requirements.”
It held that an attempt to equalise by retroactive levelling down would:
The CJEU noted that measures seeking to end discrimination contrary to EU law may, exceptionally, be adopted with retroactive effect, provided that, in addition to respecting the legitimate expectations of the persons concerned, those measures are in fact warranted by an overriding reason in the public interest. It commented that, in particular, according to settled case law, “the risk of seriously undermining the financial balance of the pension scheme concerned may constitute such an overriding reason in the public interest”.
However, in Safeway’s case, this had not been put forward as an argument for the need for retrospectivity (despite, as acknowledged by the CJEU, the reference setting out that the financial consequences of the dispute amounted to approximately £100 million).
Since no further information had been given to establish that the measure concerned was warranted by an overriding reason in the public interest, the CJEU found that no objective justification was made out. It concluded that “it is nevertheless for the referring court to verify that such is the case”.
The case will now return to the UK’s Court of Appeal to conclude matters and make any decisions as to costs.