Safeway v Newton: EU prohibition on levelling down applies even where scheme allowed retrospective reduction of benefits during the Barber window
The Advocate General has published an opinion in Safeway Ltd v Newton and another, which concludes that normal pension age (NPA) could not be levelled down retrospectively from the date of an earlier announcement to members, even if a power in the scheme’s rules allowed this.
This is the latest development on equalisation stemming from the landmark ECJ decision in Barber v Guardian Royal Exchange Assurance Group on 17 May 1990.
Safeway’s pension scheme had an NPA of 65 for men and 60 for women. In September 1991 an announcement was sent to members notifying them that NPA would be equalised at 65 for service after 1 December 1991. A confirmatory announcement was sent to members on 1 December 1991 and the scheme was administered on the basis that benefits were equalised on that date. The formal deed of amendment altering the NPA was not entered into until 2 May 1996, although the scheme’s amendment power allowed amendments to be made retrospectively, with effect from the date of an earlier announcement to members. It should be noted that the facts of this case pre-date section 67 of the Pensions Act 1995.
Safeway argued that the scheme’s NPA had been equalised on 1 December 1991, the date of the announcement to members. The Court of Appeal agreed with the High Court that the scheme could not be amended until the formal amending deed was executed on 2 May 1996, as the scheme’s amendment power required amendments to be made by deed. Whilst the High Court ruled that retrospective levelling down (ie increasing the NPA to the less favourable basis) breached EU law, the Court of Appeal was uncertain and referred this question to the Court of Justice of the EU (CJEU).
The Advocate General concluded that EU law prohibiting retrospective levelling down applies even where, under domestic law, this is permitted by a power in the scheme rules. This would mean that Safeway could not rely on the scheme’s power of amendment to reduce members’ benefits retrospectively from the December 1991 announcement until May 1996 when the scheme was formally amended by deed.
The CJEU’s decision is awaited. Whilst the CJEU usually follows the Advocate General’s opinion, it is not binding. If the CJEU reaches the same decision, the cost to Safeway’s scheme is likely to amount to over £100 million. However, the decision will have limited wider impact, as it will only be relevant to schemes with a similar retrospective power of amendment and which sought to equalise retrospectively before 6 April 1997, when section 67 of the Pensions Act 1995 came into force.