The High Court has issued a long-awaited follow-on judgment in the Lloyds Bank case. The judgment suggests that many transfer payments made since May 1990 will need to be topped up, to allow for GMP equalisation.


In October 2018 the Court held that schemes had to equalise benefits, as between men and women, for the effect of guaranteed minimum pensions ("GMPs").  Trustees were required to adjust the benefits which they provided for service from 17 May 1990 to 5 April 1997, so as to achieve equality. Our 2018 client update provided details.

The original judgment left several questions unanswered. Chief among them was the position as regards past transfers-out. Where transfers had been made without allowing for GMP equalisation, what liability if any did the transferring trustees retain?

That question is addressed in the follow-on judgment. Some of the Court's conclusions are specific to the three schemes associated with Lloyds Bank (the "Lloyds schemes"). But the judgement also establishes some important general principles.


Individual transfers-out are usually under the "cash equivalent" legislation (ss93-101 Pension Schemes Act 1993).  Most of the discussion in the follow-on judgment relates to such statutory transfers.

Key principles

The Court held that, under the cash equivalent legislation, trustees had a duty to pay a correctly-calculated transfer value. This meant allowing for GMP equalisation. If the trustees had not allowed for GMP equalisation, such that there was a shortfall in a transfer value, then:

  • The trustees had breached their duty at the time when they made the transfer.
  • The cash equivalent legislation did not provide that the defective transfer value calculation was final and binding, or discharge the trustees from liability in respect of the shortfall. Nor could any discharge in scheme rules assist: s129 Pension Schemes Act 1993 states that the requirements of the cash equivalent legislation override scheme rules. (See below as to discharge forms signed by members.)
  • In the absence of any discharge, the transferee could require the trustees to pay a top-up transfer to the receiving scheme, equal to the shortfall plus simple interest at 1% above base rate.
  • The transferee could not instead require the trustees to provide a residual benefit, nor could the trustees require the transferee to accept such a benefit. However, the Court recognised that it might be possible to provide a residual benefit if both parties agreed.
  • If a receiving scheme was unwilling or unable to accept a top-up transfer, an appropriate solution would need to be agreed between the transferring trustees and the transferee, or in the absence of agreement could be imposed by the courts (which might, for example, order the trustees to pay compensation).

Member discharges

The Court considered whether discharge forms signed by Lloyds scheme transferees relieved the trustees from liability to make top-up transfers. Given the way the forms were worded, the Court concluded that the answer was no. The forms included discharges as regards "benefits", but a top-up transfer did not constitute a benefit.

In view of its conclusion about the wording of the Lloyds scheme forms, the Court did not have to decide whether (as a matter of law) discharge forms could relieve trustees from liability to make top-up transfers.

Time bars

The Court held that top-up claims from transferees were not subject to any statutory limitation period. Furthermore claims were not subject to the forfeiture provisions in the Lloyds schemes' rules, for one or both of the following reasons:

  • In the judge's view, the forfeiture provisions were overridden by s129 Pension Schemes Act 1993 (see above).
  • Given the way in which the forfeiture provisions were worded, they did not in any case apply. For example, a forfeiture provision which referred only to "benefits" did not apply, because a top-up transfer did not constitute a benefit.

Being proactive

The Court said that trustees should not take a purely reactive approach as regards top-up transfers. Trustees had a duty to be proactive. However, the Court did not say that this would necessarily involve identifying and topping up every relevant past transfer. Being proactive meant considering the obligations, rights and remedies arising from the judgment (including the absence of time bars); and then deciding what to do.

What about receiving schemes?

The Court noted that, where a transfer had been made to a defined benefit scheme, the receiving trustees might have their own duty to equalise, on the basis of the 1994 Coloroll case. The existence of such a duty made no difference to any top-up duty of the transferring trustees. The respective duties were concurrent, and both would have to be performed.

The Court did not rule on any issues which there might be between transferring and receiving trustees, for example by virtue of indemnities or disclaimers in transfer documentation.  Nor did the Court decide whether defined contribution schemes might have a duty to equalise on the Coloroll basis.


The comments above relate mainly to statutory transfers. The Court also considered two types of non-statutory transfer (transfers made under scheme rules, rather than under the cash equivalent legislation):

  • Bulk transfers without consent – where a transfer had been made for a group of members to a scheme which provided mirror-image benefits. The trustees had not sought the members' consent to the transfer. Instead, the trustees had taken a route permitted by the "preservation" legislation, under which an actuary certifies that benefits under the receiving scheme will be broadly equivalent to those under the transferring scheme.
  • Individual rule-based transfers – where a transfer had been made at a member's request other than under the cash equivalent legislation.

Bulk transfers without consent

The Court held that, provided the trustees had met the requirements of the preservation legislation as to transfers without consent, they had been discharged under the legislation when the bulk transfers were made. Accordingly the trustees retained no liability in respect of GMP equalisation.

Individual rule-based transfers

Under the rules of the Lloyds schemes, the trustees (or in one case the employer) had considerable discretion as to how non-statutory transfer values were calculated. Against that background, the Court held that a transfer value could not be said to have been incorrectly calculated merely because allowance had not been made for GMP equalisation.

Instead, a transferee who wished to mount a challenge would need to show:

  • that when calculating the transfer value, the trustees had failed to consider a relevant matter (i.e. GMP equalisation) and that this failure amounted to a breach of duty; and
  • that the calculation should be set aside by the court (since a failure as just described would make the trustees' decision voidable rather than automatically void).

Unless and until a transferee succeeded on both of these points, he/she had no right to a top-up payment. Nor (on the wording of the Lloyds schemes' rules) would the transferee retain any right to benefits under the transferring scheme.


The follow-on judgment could yet be the subject of an appeal. Subject to that, schemes will need to consider the judgment's implications with their advisers. The issues for trustees include:

  • The appropriate fact-find. In view of the Court's ruling as to time-bars, transfers dating back to 1990 are potentially in-scope. The legal position as regards a given transfer may depend on whether it was statutory or non-statutory, and on the relevant scheme rules and the forms signed by the transferee. Trustees may no longer hold records as to transferees, transfer amounts or receiving schemes.
  • Difficulties with top-up transfers. The default remedy stipulated by the Court will not be easy to implement in practice. A transferee's original transfer value will need to be recalculated. Agreement will need to be reached with the receiving scheme as to the making of a top-up transfer.
  • Possible alternative remedies. Trustees may wish to explore whether there is scope to agree alternative remedies with transferees. In some cases an alternative may be essential – e.g. where a receiving scheme cannot or will not accept a top-up.
  • Tax. Any tax implications of top-up transfers or alternative remedies will need to be considered.
  • Proactivity. After considering both the legal position and the practicalities, trustees will have to decide how far to go in identifying and re-opening any historic transfers which (in the light of the Lloyds Bank judgments) were underpaid.