This morning, 20 November 2020, the High Court gave judgment in Lloyds Banking Group Pensions Trustees Limited v Lloyds Bank plc on the issue of transferring schemes' liability to make up shortfalls in transfer values calculated on the basis of unequalised GMPs. The full judgment runs to over 400 paragraphs and we are in the process of considering the detail. However, according to the summary contained in the closing paragraphs of the judgment, the position is as follows.
In the case of transfers made under the cash equivalent legislation the position is:
- the Trustee owed a duty to a transferring member to make a transfer payment which was correctly calculated and which reflected the member’s right to equalised benefits;
- the Trustee committed a breach of that duty in some cases by making an inadequate transfer payment;
- the breach occurred at the time of the transfer;
- the Trustee remains liable to the transferring member for its breach of duty;
- the Trustee is not discharged from that liability by any statutory provision or any rule of the Schemes or by any agreement with the transferring member;
- a transferring member is entitled to seek a remedy against the Trustee and, in particular, an order from the court that the Trustee belatedly perform its duty to pay the correct transfer payment;
- a claim by a transferring member for an order that the Trustee belatedly perform its duty is not time barred, either under the rules of the Schemes or under the Limitation Act 1980;
- the Trustee is able belatedly to perform its duty even without an order of the court.
In relation to bulk transfers, the judgment summary says where the relevant legislation has been complied with and the bulk transfer was in accordance with the rules of the transferring scheme, then the transferring members are entitled to benefits under the receiving scheme and are no longer entitled to benefits under the transferring scheme.
In the case of individual rule-based transfers, the judgment says that the legal position depends on whether the Trustee committed a breach of duty, with the transferring member no longer having rights against the transferring scheme if there was no breach of duty. Whether the Trustee committed a breach of duty would require an investigation of the relevant circumstances which was not carried out for the purposes of the Lloyds Bank court case.
Based on the judge's summary, the judgment appears to potentially open the way to large numbers of transfer values being revisited, though it appears that the legal position on a bulk transfer without consent may be different from individual transfer values paid under cash equivalent legislation. We are in the process of considering the detail of the judgment to assess its full implications.