Lloyds Pension Bill After Ruling May Be Lower Than Some Warned
(Bloomberg) -- Lloyds Banking Group Plc was ordered by a U.K. judge to overhaul its pension plan to guarantee equal benefits for men and women, though the ruling may cost the bank much less than union representatives originally warned.
Judge Paul Morgan in London ruled that the trustee of the pension plan had a duty to amend the terms of the plan, saying that the issue has created uncertainties “for many years.” While the BTU union had initially estimated that the cost could top 500 million pounds ($640 million), after the ruling both the union and the bank put that figure at closer to 100 million pounds.
Three female members of the pension plan had claimed they were discriminated against because their retirement payments increase at a lower rate than male colleagues. About 230,000 members of the bank’s defined-benefit scheme between 1990 and 1997 are affected and the ruling may stretch to about 7.8 million people in companies across the U.K., according to the BTU.
“The essential questions raised by this claim are likely to be the same for the very many contracted-out defined benefit occupational pension schemes that provide guaranteed minimum pensions,” Morgan said in a ruling Friday.
Lloyds said in a statement that it “welcomes the decision made by the court and the clarity it provides.” The pension trustee had asked the court whether and how it’s obliged to adjust pension benefits to compensate for unequal guaranteed minimum pensions earned by male and female members.
Samantha Brown, a pensions lawyer at Herbert Smith Freehills LLP in London, said that some estimates indicate that FTSE 100 companies could take a “P&L hit of up to 15 billion pounds” as a result of the ruling. But there is a silver lining, she said.
“Employers will be relieved that the court stopped short of requiring schemes to adopt a gold-plated approach to equalization,” Brown said. “Instead, the court approved a lower cost approach, balancing the interests of members and employers. It has left scope for trustees and employers to explore simpler options for achieving the necessary outcome.”
The BTU union, which initially said Lloyds might have to pay up to 500 million pounds to address pension inequalities, said Friday that Morgan’s ruling could reduce that to 100 million pounds.
“This landmark judgment resolves this pension discrimination issue for good and will bring equality to millions of women across the country,” Mark Brown, General Secretary at BTU, said in a statement. “It’s simply unacceptable that 48 years since the passing of the Equal Pay Act in 1970 we are still fighting for equal treatment in the workplace.”
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