The implementation of the High Court’s decision in the recent Lloyds case “raises a number of important practical difficulties” for pension schemes, according to Norton Rose Fulbright.

In November, the High Court ruled that trustees of defined benefit (DB) schemes that provided Guaranteed Minimum Pensions (GMPs) should revisit and, where necessary, top-up historic cash equivalent transfer values (CETVs) that were calculated on an unequalised basis if an affected member makes a successful claim.

In a publication, Norton Rose Fulbright outlined what steps schemes might need to take and what factors they may need to consider as they seek to implement rules based off the judgment.

It stated: “While the court did not reach a definitive conclusion on the need for trustees actively to pay top-up sums, and recognised the likelihood of administrative difficulties and cost concerns, [Mr Justice] Morgan was clear that trustees had committed a breach of their fiduciary duties and at the very least had an obligation to proactively consider the position of members who had been disadvantaged.”

As a first step, Norton Rose Fulbright recommended that trustees review what records they have regarding transfers out, including whether those records identified the details of the underlying benefits and the receiving scheme.

The impact of buy-ins and buyouts should also be considered, as it was pointed out that there could be many cases where GMP top-up payments for past transfers would not have been included as an obligation of the insurer.

The legal firm added that if schemes had promised a top-up later if it was needed, that exercise needs to be initiated now, although schemes that delivered equalised transfer payments from quite early on may have less to do now.

A statement from the firm concluded: “As so often seems the case, while this judgment may define principles which seem clear from a legal perspective, their practical application is likely to be far from straightforward.

“Little has been clarified regarding the seemingly competing obligations of transferring and receiving schemes to pay equalised benefits and ultimately there will need to be a significant degree of pragmatism.”

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