State Pension  

Lloyds set to change pension rules

Lloyds set to change pension rules

Lloyds is making changes to its pension scheme for offshore islands, after being accused of pension discrimination.

According to the Lloyds trade union (LTU), the bank was making deductions to women's state pension when they reached the age of 60, while this cut only affects men at the age of 65.

The bank has stopped making deductions in a specific case affecting a female worker in Jersey, and is now expected to apply the same rules to all female workers in the island, said Mark Brown, Lloyds Trade Union's general secretary.

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He said: "We told the bank that what they were doing was discriminatory. That in Jersey they now have discrimination laws, and if they didn't change its position we would take legal action against the bank.

"They decided pretty quickly to change their position. They have changed it for this one individual, and the reality is that they will have to change it for everybody else."

FTAdviser understands that the bank is working with the scheme trustees to rectify the pension fund rules, and that the detailed implementation of that approach is being finalised.

However, Lloyds has no current relationship with the union, the bank said. It derecognised LTU in 2015, which means the union can't participate in formal negotiations over pay and conditions, but it can still represent individuals in a dispute.

Between 1978 and 1997, employers sponsoring defined benefit (DB) pension schemes could contract their employees out of the additional state pension, as long as the scheme paid a comparable guaranteed minimum pension (GMP).

The benefit of contracting out was that both employer and worker had a reduction in their National Insurance contribution.

But, because they were contracted out, these members will, when they start receiving their state pension, have a reduction in their bank pension, known as clawback.

According to Lloyds Trade Union, under the Lloyds Bank Offshore Pension Scheme rules, the state pension deduction is made at age 60 for females and 65 for males.

The state pension age in Jersey is currently 65 but is gradually increasing to 67 over a 12-year period which started in 2012.

The union said: “So what this means is that a man and woman who joined the Bank in Jersey at the same time and retire at 60 will be treated differently by the scheme.

"The man will get his full pension with no deduction until he reaches 65, whereas a woman's pension will be immediately subject to a state pension deduction."

In the specific case of the female worker brought to the bank's attention by the trade union, she would have her pension reduced by £1,190 per year or £5,950 over five years.

According to Mr Brown, this is a problem arising from the fact that the scheme rules haven't kept pace with what has happened with the state pension.

He said: "The pension scheme rules in Jersey, Guernsey and Isle of Man says that the clawback applies when you get your pension, whereas on the mainland it says the clawback applies when you get your state pension."