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The Williamson Case
Janet Chiaro looks at the implications of the Williamson case for UK pension schemes.
Marsh Maclennan vs The Pensions Ombudsman (Williamson vs Sedgwick)
Pension benefits have to be equal as between the sexes since the Barber judgement on 17 May 1990 - for example, in common retirement ages, and in spouse's pensions. However, those schemes which are contracted-out of the state scheme also have an underlying Guaranteed Minimum Pension (GMP), which broadly reflect state benefits. GMPs are unequal for the vast majority of men and women, principally because of different state retirement ages. This can cause total benefits of a male and female to be unequal, even though in every other respect they are equal. It is true to say that, to date the vast majority of schemes have not done anything to equalise GMPs. This has been partly due to the complexity of the exercise - it is recognised that the cost of undertaking the exercise can exceed any additional benefit gained for members.
One deferred pensioner of the Sedgwick Group's Occupational Scheme decided to take his case to the Pensions Ombudsman. As a result, in January 2000, the Pensions Ombudsman directed that the trustee and employer of the Sedgwick Group Pension Scheme should, as soon as reasonably practicable, ensure that GMPs were equalised for service after 17 May 1990.
The trustee and employer appealed to the High Court against the Ombudsman's determination.
The High Court has now decided that the Ombudsman had in effect, no authority to make this decision. The Court held that the Ombudsman's direction had been imprecise and uncertain and that he had been in error in making it. Unfortunately, the Court was not willing to give a definitive ruling on whether the equal treatment rule requires GMPs to be equalised.
It is apparent that there is uncertainly regarding this issue and that this may go on for some period of time. Employers and Trustees should be thinking in particular about whether any allowance should be made for GMP equalisation in the funding of the scheme, including any one-off implementation cost.
Current uncertainty is also likely to inhibit the movement of transfers-in and out of the scheme. In particular, trustees should be seeking GMP equalisation indemnities before accepting individual transfers-in, and may also want to consider whether, in this environment, they should continue to accept individual transfers-in at all.
Finally, whilst this issue remains unsolved, this may delay the winding-up of contracted-out schemes.
Janet Chiaro, March 2001.