Simplicity is not that simple

by | May 1, 2024 | Pension History

In 1978, the Social Security Pensions Act added an earning related component to the flat rate State pension. Schemes which fulfilled statutory conditions, notably by paying a guaranteed minimum pension or GMP, could contract out of the new pension entitling employer and members to pay lower national insurance contributions.

In May 1990, in the celebrated GRE v Barber case, the European Court of Justice ruled that for future service the right to equal pay for men and women included payments from occupational pension schemes – and that, until equalised, benefits such as different retirement ages and conditions must be levelled up. That apparently simple principle proved hard to implement. Litigation was necessary to explore whether procedural irregularities and long-standing practices such as announcing changes in advance of a formal deed of amendment were sufficient to equalise and so close the Barber ‘window’. The law was having to be clarified at a time when the stakes, in the form of material additional liabilities, couldn’t have been higher.

GMP’s were even trickier.  Barber did not affect State pensions themselves, but because GMP’s were enshrined in statute and tied to the different State pension ages that then applied, they resulted in different accrual rates and unequal treatment. Legal debate continued. Although GMP’s themselves ceased to accrue after April 1997 it was not until 2018, 28 years after Barber that the need to equalise GMP’s was confirmed.

Pensions Archive Trust Director, Jane Marshall

This article was first published in the May 2024 edition of Pensions Age magazine.