Lloyds Trade Union has announced it will launch a class action against the bank on behalf of 28,000 female members of its defined benefit schemes, which may set a precedent for similar cases and could cost more than £13bn industry-wide.
The legal challenge centres on how guaranteed minimum pensions are increased, and the potential cost is what the Napf and Association of Consulting Actuaries estimate will be the bill for Lloyds to implement the union’s demands.
Earlier this month, the Department for Work & Pensions was accused of delivering ‘a political response’ rather than a clear explanation of issues surrounding guaranteed minimum pension accrual.
According to Lloyds Trade Union, there is an acceptance in the industry that there is a discriminatory element between men and women.
The reasons are that men and women accrue GMP at different rates, men and women are entitled to GMPs at different ages (65 for men and 60 for women) and many schemes apply different increases to GMPs than non-GMP benefits.
If pensioner and deferred members are included in the calculations, then the outcome of the case could affect 148,000 members of the bank’s defined benefit pension schemes, according to the trade union.
According to data obtained by the union, the issue is more widespread than the Lloyds Banking Group pension schemes. It suggested there are 2,400 contracted out pension schemes with over 7.8m members in a similar situation.
Despite representing the largest number of Lloyds pension scheme members, Lloyds Trade Union has not been a ‘recognised’ union of the Lloyds Banking Group since July 2015.
A spokesperson for the Lloyds Trade Union told FTAdviser the union chose not to sign a recognition agreement in July 2015 because it would have prevented it from certain strategies such as taking the current legal action underway.
“We were determined about being an independent trade union - the agreement would have resulted in stopping a lot of campaigns inside and outside the bank.
However John Cormell, associate at acutarial firm Barnett Waddingham said his general view is carrying out GMP equalisation is a “waste of time because the impact it will have on pension schemes is tiny”.
“On the flipside carrying out GMP equalisation creates work for advisers - but it does not feel like a worthwhile use of time and money of pension schemes and advisers,” he said.
“In most pensions men are worse off than women so once equalised, the men would be better off than they were previously. The [LTU] court case will be really interesting, in particular if a methodology was produced for the future. There are lots of different ways to do it [calculate GMP equalisation] but not much appetite to do it.”
Mark Brown, general secretary at Lloyds Trade Union said: “GMPs is one of the last bastions of pension discrimination and the issue needs to be resolved now. Up to 5 million women, including up to 148,000 in Lloyds Banking Group, have either got or are going to get smaller pension increases than men and that is simply unacceptable.
“The pensions industry and government have sought to kick this issue into the long grass hoping that it goes away.
“The issue is not going away and the government should publish its regulations now. In the absence of any government action, the trustees of the Lloyds Banking Group Trustees Limited should put this right.”
Bill Marshall, a financial planner with Newcastle-based Lamb and Associates Lifestyle Financial Planning, said: “Historically women and men were treated differently as far as what benefits they could buy.
“Womens annuities were more expensive because men die earlier. In this day and age it should be unisex and this part [GMP] hasn’t caught up with everyone else.
A Lloyds spokesperson declined to comment.
ruth.gillbe@ft.com
