Barber v Guardian
Royal Exchange (1990)
Mr. Barber was an employee of Guardian Royal Exchange (GRE)
and a pension scheme member. The GRE pension was established
as a contracted out non
contributory scheme with a normal pensionable age of 62
for men and 57 for women. On redundancy an immediate pension
income would be paid at age 55 for men and 50 for women.
Mr. Barber was made redundant at the age of 52 receiving
cash benefits and statutory redundancy payments but was not
entitled to the GRE retirement
benefits due to his age in contrast to similarly aged
women that would receive an immediate pension. Mr. Barber
complained that this difference was sex discrimination and
in breach of article 119 of the Treaty of Rome concerning
equal pay for equal work.
The case was referred to the European
Court of Justice (ECJ) that subsequently held that the
GRE could not lawfully refuse an immediate pension to Mr.
Barber through the employers
pension scheme. The ECJ decision was that pay for the
purpose of article 119 of the Treaty of Rome does include
an occupational pension scheme. It was held that the Barber
judgment would apply only to pensionable service after 17
May 1990 and that equalisation
rules for the retirement
age of men and women must be equalised to the lower age
for accrued members pension rights or any chosen age for future
With the continued development of equal opportunities, the
Treaty of Amsterdam broadened the definition of 'equal pay'
in article 119 amended to 'equal pay for male and female workers
for equal work or work for equal value' in article 141 and
effective from 1 May 1999.
In addition to a basic salary, an employer will often make
other payments to an employee such as overtime and bonuses.
Also, the employer may provide benefits in kind such as a
company car and payment of medical insurance premiums. Cash
payments to an employee such as overtime will be reflected
in the employers year end tax returns and the P60 issued to
The value for tax purposes of benefits in kind will be reflected
on the form P11D
benefits. All the remuneration described above can be
used to frank pension contributions by the employee. Occupational
pension schemes offer group additional voluntary contribution
facilities although, for employees earning less than £30,000,
they may be better advised to direct their additional contributions
to stakeholder pensions as there is the opportunity to commute
part of the pension income to a tax
free lump sum.
Under the Financial Services and Markets Act 2000 (FSMA),
formally the Financial Services Act 1986 anyone selling or
advising on investments and pensions must give clients and prospective clients best advice. This
means the adviser will need to be aware of the client's circumstances
and show where possible that the recommendations are based
on an unbiased evaluation of what is best for the client.
BR 19 form
By submitting this to the Benefits Agency it is possible to
obtain a statement of retirement benefit, up to 4 months prior
to state retirement age. The statement will forecast expected basic pension plus state earnings related pension scheme (SERPS) based upon
contributions made to date and likely future contributions.
BR 20 form
By submitting this to the Benefits Agency it is possible to
obtain a lump sum valuation of state earnings related pension
v Brooks (1995)
The couple married in 1977 and the case was first considered
by the District Court in October 1992. The couple operated
a successful family business where a small self administered
represented a significant part of the family assets. Mrs.
Brooks was employed by the company and was eligible to receive
significant benefits within the flexibility of the SSAS.
The court held that the SSAS was a post-nuptial settlement
and therefore formed part of the matrimonial assets. The Judge
awarded non-member pension benefits to Mrs. Brooks of £76,000
from the SSAS. On appeal the High Court, then the Appeal Court
and finally the House of Lords all upheld the decision.
For an employers pension scheme a bulk transfer of the assets
and liabilities other than on winding up could occur if; the
employer closes a scheme such as a final
salary pension to new entrants in favour of a money purchase
scheme and offers an existing scheme member with accrued retirement
benefits the option of a pension
transfer or if part of the business is sold to a new employer
the members pension rights will be protected by regulations
although any future retirement benefits may not be maintained
at previous levels.
Where a sale takes place the consent of the scheme member
is required although an individual could instead choose a
pension transfer to a personal
pension, section 32 policies or no transfer at all. If
the scheme is in surplus, on a bulk transfer the new scheme
trustees will take responsibility for this amount. If the
new scheme is underfunded,
this surplus would help the scheme to meet the minimum funding requirement
A bulk transfer could be achieved without the consent of
members, however rarely occur due to the restrictions of the
Preservation of Benefits Regulations 1991 and the restrictions
imposed by the scheme rules.
v Burrow (1999)
The couple married in 1978, separated in 1994 and at the time
of divorce they had two children. The total value
assets exceeded £1,000,000 with the family
home worth £400,000, the husband's interest in a company
worth £275,000 and the husbands pension
fund worth £265,000. The District Judge ordered
the sale of the family home with £349,000 going to the
wife with maintenance of £1,200 per month from the husband's
income of £3,000 net per month.
There was also an earmarking
order for half of the maximum possible tax free lump sum
from the husband's pension and half of his annual pension
income. The husband appealed against the earmarking order
and this was allowed against the pension income only, as per
the Matrimonial Causes Act 1973 (MCA
73) stating that an even split between the parties was
An early leaver with a deferred pension can use a buyout policy
to transfer from an occupational
pension scheme. Under the Finance Act 1981, an employee
can take out a deferred annuity policy through an insurance
This policy will be similar to a personal pension except that
it will retain the occupational pension scheme regime with
regard to the Inland Revenue maximums for the benefits taken
at retirement age. The annuity must match the guaranteed
minimum pension (GMP) if the occupational scheme is contracted
out of the state earnings related pension scheme (SERPS).