Welter of litigation predicted as pension trustees eye legal actions over alleged bad advice in the 1990s
Eversheds is facing potential legal action from the trustees of a pension scheme in what could be the first in a deluge of pensions-related claims against law firms.
The trustees of the Britannia Building Society Pension Scheme have filed a High Court claim, which has not yet been served, alleging that Eversheds, along with financial adviser Sedgwick Noble Lowndes and consultancy firm Mercer, gave negligent advice when the scheme equalised the benefits for men and women in the 1990s.
Following the 1990 European Court of Justice ruling in Barber v Guardian Royal Exchange Assurance Group, it became a legal requirement for schemes to equalise the retirement ages for men and women.
But as a number of recent court cases, such as Foster Wheeler v Hanley & Ors (2008), have found, equalisation was not always done correctly. This has resulted in some schemes having to meet large unfunded liabilities, with trustees now mulling whether to take legal action against the original advisers.
As one City pensions partner explained, equalising retirement ages would result in scheme liabilities increasing, but funds could then close the so-called ‘Barber window’ to reduce overall benefits. The problem is that in many cases the window was not closed properly, meaning benefits have been accruing at the higher level since the 1990s.
“There are tens of millions of pounds of liabilities that are not funded for,” the partner said. “Because of the court cases there’s a greater awareness that things could have gone wrong.” This has led to many schemes considering seeking redress against legal and financial advisers.
Adding that the Pensions Protection Fund, which takes over a scheme if a company becomes insolvent, requires equalisation to have been carried out, the partner said that trustees are more willing to address issues with documentation.
Separately, Allen & Overy (A&O) is facing action from the trustees of the Centrica Pension Plan and the 11 companies that fund it.
That High Court claim, which has been filed but not served, claims that the firm was negligent when drafting documentation between 2001 and 2004.
ccording to the writ, the claimants suffered losses due to the alleged breach because the benefits paid to members were too generous.
An A&O spokesman said the parties are in talks and that the firm is seeking to sort the matter out before it goes as far as reaching court.