GMP-E and LBG-3

Blog 15 May 2020 By Angela Burns

GMP-E and LBG-3: The third Lloyds Bank pension schemes hearing and implications for past transfers-out


The third hearing in the Lloyds Bank GMP equalisation case started on 4 May and finished this week.


A number of questions are being addressed, but fundamentally this case seeks to answer the question – “where an ‘inadequate’ transfer is paid out, what is the effect of this omission?” i.e., what should be done about transfers that did not include an uplift for GMP inequality and, if something needs to be done, who pays for it? Potentially 15,000 transfers in scope just for the Lloyds schemes!


Arguments were submitted on behalf of the Bank, the trustee and the representative member. Here is a brief summary of the submissions on behalf of these different stakeholders.




For the members of the Lloyds Bank pension schemes, it was argued that the transfer value is an element of consideration of the contract of employment and relieving the Bank from liability for an inadequate transfer would breach the principle of equal pay.


The transferring scheme is, therefore, responsible for top-ups in respect of members who have transferred out but did not, at the time, get a ‘GMP equalised’ transfer.




On behalf of Lloyds Bank, it is submitted that the Bank is relieved of any duty because of the ‘Coloroll’ judgment where it was held –


“…in the event of the transfer of pension rights from one occupational scheme to another owing to a worker’s change of job, the second scheme is obliged, on the worker reaching retirement age, to increase the benefits it undertook to pay him when accepting the transfer so as to eliminate the effects, contrary to Article 119, suffered by the worker in consequence of the inadequacy of the capital transferred, this being due in turn to the discriminatory treatment suffered under the first scheme, and it must do so in relation to benefits payable in respect of periods of service subsequent to 17 May 1990.”


So, if a member brought in a transfer value of £100,000 and it should have been £102,500 then it is the receiving scheme that is on the hook (subject to any indemnities it may have asked for) and the receiving scheme must treat the member as having brought in £102,500.




The Trustee in this case is ‘largely’ neutral and just wants to know what to do, if anything. But, it is not completely agnostic.


The Trustee agrees that the obligation moves to the receiving scheme. And this, it is argued, applies whether that scheme is DB or DC, because ‘transfer credits’ provided in return for a transfer can always be DC, even on a DB to DB scheme transfer.




When this judgment is published, given the depth of the submissions in the case, we should learn about the entire CETV process and the legal effect of a transfer under both domestic and EU law. Lessons should extend far beyond just the key issue mentioned in the introduction to this article.


Whilst the judgment may be a few months away, it is worth noting that the judge (Morgan LJ) found the idea of liabilities being imposed on a person not responsible for wrongdoing (i.e. the receiving scheme) to be “baffling”.


A hint of what is to come?

Angela Burns

Actuarial & Investment
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