CELEX: 61991CJ0200
Equal pay for men and women
Occupational pensions
Use of actuarial factors differing according to sex
Limitation of the effects in time of the judgment in Case C-262/88 Barber

Grounds
1 By order of 23 July 1991, received at the Court on 31 July 1991, the Chancery Division of the High Court of Justice of England and Wales referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a series of questions on the interpretation of Article 119 of that Treaty and of the judgment of the Court of Justice of 17 May 1990 in Case C-262/88 Barber v Guardian Royal Exchange Assurance Group [1990] ECR I-1889 (hereinafter "the Barber judgment") regarding the limitation of its effects in time.
2 The questions have been raised in a representative action, provided for by the Rules of the Supreme Court, brought before the High Court by Coloroll Pension Trustees Limited.
3 In accordance with a number of trust deeds (a trust being the legal form in which occupational pension schemes are generally set up in the United Kingdom), Coloroll Pension Trustees Limited holds and manages as trustee the assets of the schemes created by the various companies in the Coloroll group for their employees with the specific aim of providing them with pensions and other benefits promised by the employer.
4 As regards their principal benefits, the Coloroll pension schemes are defined benefit/final salary schemes which provide employees with a specific pension corresponding to 1/60th of their final salary for each year of service from the time when they reach normal retirement age, which is 65 years for men and 60 years for women.
5 In certain circumstances, members may retire before that age and receive immediately a pension whose amount is reduced according to actuarial factors differing according to sex, women statistically having greater life expectancy than men.
6 Those same actuarial factors operate, in the determination of amounts differing according to whether the scheme member concerned is a man or woman, where a scheme member opts, totally or partially, to receive a capital payment in lieu of pension, where part of the pension is surrendered in exchange for a reversionary pension payable to the member' s spouse, or to another person dependant on the member, which is equivalent in value to the part surrendered, and where acquired rights are transferred to another pension scheme or to an insurance company.
7 All the schemes make provision for the acquisition by members' spouses and dependants of their own pension rights. However, this benefit is restricted in certain cases to widows and to the members' male dependants.
8 As regards their financing, the schemes in question are contributory in that they are financed by contributions paid not only by the employer but also by the employees.
9 The contributions paid by the employees correspond to a percentage of their salary, identical for all employees, whether male or female. Employees also have the right to pay additional voluntary contributions to secure additional benefits which are separately calculated and credited.
10 However, the employer' s contributions, which are calculated in the aggregate, vary over time so as to meet the balance of the cost of providing the pensions promised. They are also higher for female employees than for male employees owing to the fact that, under the system of financing by capitalization, actuarial factors based on life expectancies varying according to sex are taken into account.
11 With one exception, all the Coloroll group' s pension schemes are contracted out of the State Earnings Related Pension Scheme ("SERPS"), a pension payable under that national scheme being supplementary to the basic statutory pension to which it is added in return for the payment of contributions to the national scheme. "Contracted out" means that the Coloroll schemes take the place of the national pension scheme as regards the part of the contributions and benefits that is linked to the amount of the salary received by each employee. Members of the Coloroll schemes therefore pay into the national scheme reduced contributions only, calculated according to the savings made by the State, whilst continuing to contribute to the occupational scheme. This scheme must however ensure that its members receive aggregate benefits comparable to those which they would receive under SERPS if it were applicable to them.
12 It appears from the order for reference that following the financial collapse of the Coloroll group of companies in 1990 and the appointment of administrative receivers for some of the companies belonging to the group, the trustees are to wind up the pension schemes and dispose of their assets. This requires a final ascertainment of all the liabilities of the schemes, the application of their assets for the provision of pensions and other benefits and the disposal of any surplus funds.
13 Faced with the task of having to decide the cases of hundreds of scheme members claiming a wide variety of pensions and benefits, the trustees are unsure whether the rules contained in the trust deeds, which are very detailed, are compatible with Article 119 of the Treaty as interpreted by the Court in the Barber judgment and are in doubt in particular about the application to the present case of the temporal limitation of the direct effect of Article 119 there laid down.
14 As stated above, all the schemes in question provide for the application of rules which differ according to sex, in relation to the normal retirement age and the actuarial factors applicable to the various options for taking capital-sum benefits. Two of the schemes also have the special feature of not having any female members.
15 In this situation, the trustees decided to bring a representative action before the High Court in order to have the necessary directions from that court in the exercise of its general supervisory jurisdiction over trusts. In order to do so, the trustees, as plaintiffs in the proceedings, named as defendants a number of persons chosen as representative of the various interests involved.
16 The High Court considered it expedient to stay proceedings and to refer the following questions to the Court of Justice:
1. (1) Can the direct effect of Article 119 of the Treaty establishing the European Economic Community be relied on (a) by employees and (b) by dependants of such employees, in relation to claims to benefits under a scheme where those claims are made not against the employer but against the trustees of the scheme?
(2) Can the direct effect of Article 119 be relied on in relation to a scheme (a) by employees and (b) by dependants of such employees,
(i) to require the trustees to administer the scheme as if the provisions of its rules had been altered (notwithstanding their actual terms) so as to reflect the principle of equal pay laid down by Article 119 by securing that the benefits payable under the scheme to such employees and/or dependants are equalised? or
(ii) to require the employer (if still in existence) and/or the trustees to use such powers as they may have, whether by amendment of the rules of the scheme or otherwise, to secure that the benefits payable under the scheme reflect the principle of equal pay?
and if the answer to (i) or (ii) is Yes,
(iii) does the principle of equality require the benefits of the disadvantaged sex to be increased in all cases, or is it consistent with Article 119 for the benefits of the other sex to be reduced?
(3) If the direct effect of Article 119 can be relied on both against the employer and against the trustees of the scheme, what is the relation between the liability of the scheme and that of the employer? In particular,
(i) can the employer be required to pay further funds to the trustees of the scheme?
(ii) where there are surplus assets in the scheme trust funds can the employer require that any liability under Article 119 be discharged in the first instance wholly or in part as the case may be from the surplus assets?
(iii) does any additional entitlement have to be provided for by the trustees out of the assets of the scheme where no claim has been made against the employer, or where no action has been taken by the employer to satisfy or provide for such a claim?
(4) Are the answers to parts (1) (2) and (3) of this question affected (and if so how) by whether:
(a) the funds held by the trustees are insufficient to meet in full the cost of equalising benefits so as to reflect the principle of equal pay laid down by Article 119; or
(b) the employer is unable to provide any further funds to the trustees of the scheme; or
(c) the effect of equalising benefits will or may be to achieve equality for one class of beneficiary (for instance, persons in receipt of a pension) only if the benefits of another class (for instance, current employee members of the scheme) are reduced?
2. In relation to claims to benefits under a contracted-out scheme, what is the precise effect of point 5 of the operative part of the judgment of 17 May 1990 in Case C-262/88 Barber v Guardian Royal Exchange Assurance Group (Official Journal C 146 of 15 June 1990, p. 8) that "The direct effect of Article 119 of the Treaty may not be relied upon in order to claim entitlement to a pension, with effect from a date prior to that of this judgment, except in the case of workers or those claiming under them who have before that date initiated legal proceedings or raised an equivalent claim under applicable national law"? In particular (and subject to the exception in respect of proceedings initiated prior to the date of the judgment in Barber):
(1) Can the direct effect of Article 119 EEC be relied upon by employees in relation to such a claim:
(a) only in respect of service on or after 17 May 1990 (the date of the judgment)? or
(b) also in respect of service prior to 17 May 1990, and if so, in respect of the whole period of such service, or some and if so what part of such service?
(2) If the answer to (1) is (b), can the direct effect of Article 119 EEC be relied upon in relation to such a claim:
(a) only by employees whose service under the scheme ended on or after 17 May 1990? or
(b) also by employees
(i) whose service under the scheme ended prior to 17 May 1990 and who were entitled under the rules of the scheme to payment of instalments of pension prior to 17 May 1990?
(ii) whose service under the scheme ended prior to 17 May 1990 but who were entitled under the rules of the scheme to payment of instalments of pension (a deferred pension) only on or after 17 May 1990?
(3) If the answer to (2) is (b)(i), can the direct effect of Article 119 be relied upon by such employees only in relation to instalments of pension payable on or after 17 May 1990 or also in relation to instalments of pension payable prior to that date?
(4) Do the principles laid down in answer to (1) to (3) apply equally in relation to claims to benefits by dependants of employees? In particular, to what extent and in respect of what period of service are widows and widowers (a) widowed on or after 17 May 1990, and (b) widowed prior to 17 May 1990, entitled to rely upon the direct effect of Article 119 in relation to claims to survivors' benefits?
(5) Do the principles laid down in answers (1) to (4) apply, and if so how, to benefits which do not depend on the length of actual pensionable service?
3. Do the principles laid down in answer to Question 2 apply equally in respect of schemes and periods of service which are not contracted-out?
4. Is it compatible with Article 119 to provide benefits or payments under a scheme calculated by reference to actuarial considerations (including, in particular, actuarial assumptions as to life expectancy) which produce differing results as between men and women? In particular:
(a) Can such considerations be used in the calculation of the benefits payable to an employee
(i) in respect of the cash sum payable by way of commutation of part of the annual pension?
(ii) in respect of a reversionary pension payable to a dependant in exchange for the surrender of part of the annual pension?
(iii) by way of a reduced pension where the employee chooses to retire early and to start receiving pension instalments before normal pension age?
(b) Where the trustees of a scheme pay a capital sum to a third party in order to secure the payment of pension benefits by the third party to an employee or dependant in respect of whom the capital sum is paid, are the trustees entitled or required:
(i) to pay a capital sum which is equal as between men and women but which will purchase pension benefits which are unequal as between men and women?
(ii) to adopt some other (and if so, what) courses or course?
(c) In the light of the answers given to (a) and (b), together with the answers given to Question 2, are the trustees of a scheme required to review and recalculate determinations made by reference to such actuarial considerations in relation to events prior to 17 May 1990, and if so in respect of what period?
5. (1) In circumstances where a scheme is not funded exclusively by employers' contributions but is also funded by employees' contributions, being (i) contributions required of employees under the rules of the scheme and/or (ii) voluntary contributions additional to those required under the rules of the scheme, does the principle of equality laid down by Article 119 apply:
(a) only to benefits payable out of those assets of the fund which are attributable to employers' contributions? or
(b) also to benefits payable out of those assets of the fund which are attributable to (i) normal scheme contributions and/or (ii) additional voluntary contributions?
(2) When an employee has transferred from one scheme to another (for example on a change of job) and liability has been accepted by the receiving scheme for the payment of benefits in return for a transfer payment from the trustees of the former scheme, does Article 119 apply so as to require those benefits to be increased by the scheme where necessary to reflect the principle of equality? If so how do the principles laid down in answer to Question 2 apply in such circumstances?
6. Does Article 119 apply to schemes which have at all times had members of only one sex so as to entitle a member to additional benefits to which that member would have been entitled as a result of Article 119, had the scheme had a member or members of the other sex?
Question 1(1)
17 By the first part of the first question the High Court asks, first, whether an employee' s dependants may, like the employee himself, rely on the direct effect of Article 119 of the Treaty and, second, whether that article may be relied on not only against the employer but also against the trustees of an occupational pension scheme.
18 As regards the first part of the question, the Court, in its judgment of 6 October 1993 in Case C-109/91 Ten Oever v Stichting Bedrijfspensioenfonds voor het Glazenwassers-en Schoonmaakbedrijf [1993] ECR I-4879, held that a survivor' s pension provided for by an occupational pension scheme falls within the scope of Article 119. It also held that the fact that such a pension, by definition, is not paid to the employee but to the employee' s survivor does not affect that interpretation because, such a benefit being an advantage deriving from the survivor' s spouse' s membership of the scheme, the pension is vested in the survivor by reason of the employment relationship between the employer and the survivor' s spouse and is paid to the survivor by reason of the spouse' s employment (paragraph 13).
19 It follows that since the right to payment of a survivor' s pension arises at the time of the death of the employee affiliated to the scheme, the survivor is the only person who can assert it. If the survivor were to be denied this possibility, this would deprive Article 119 of all its effectiveness as far as survivors' pensions are concerned.
20 As regards the question whether Article 119 may be relied on against the trustees of an occupational pension scheme, the Court in the Barber judgment, after finding that pensions paid under such schemes fall within the scope of Article 119, held that this conclusion remains valid even where the scheme has been set up in the form of a trust and is administered by trustees who are formally independent of the employer, since Article 119 also applies to consideration received indirectly from the employer (paragraphs 28 and 29).
21 The employer cannot therefore avoid the obligations incumbent on him under Article 119 by setting up the occupational pension scheme in the legal form of a trust.
22 The trustees themselves, although not party to the employment relationship, are required to pay benefits which do not thereby lose their character of pay within the meaning of Article 119. They are therefore bound, in so doing, to do everything within the scope of their powers to ensure compliance with the principle of equal treatment.
23 It is true that the trustees' obligations towards the members of the scheme and their dependants are laid down in the trust deed which is governed by national law. However, as the United Kingdom rightly points out, the effectiveness of Article 119 would be considerably diminished and the legal protection required to ensure real equality would be seriously impaired if an employee or an employee' s dependants could rely on that provision only as against the employer, and not against the trustees, who are expressly charged with performing the employer' s obligations.
24 The answer to the first part of the first question must therefore be that the direct effect of Article 119 of the Treaty may be relied on by both employees and their dependants against the trustees of an occupational pension scheme who are bound, in the exercise of their powers and performance of their obligations as laid down in the trust deed, to observe the principle of equal treatment.
Question 1(2)
25 By the second part of its first question the High Court asks whether, where certain rules of the scheme are incompatible with the principle of equal pay, the trustees must administer the scheme without regard to those rules, or whether the employer and the trustees must amend them so as to make them compatible with Article 119. The High Court also asks whether the only way of bringing about equal treatment is in any event to increase the benefits of the disadvantaged class, or whether such equality may also be achieved by reducing the benefits of the advantaged class.
26 As regards the first part of the question, it must be remembered that the principle of equal pay is one of the foundations of the Community and that Article 119 creates rights for individuals which the national courts must safeguard. Article 119 being mandatory in nature, the prohibition of discrimination between men and women applies not only to the acts of public authorities but also to all contracts between private individuals and to all collective agreements intended to regulate paid employment (see the judgment of 8 April 1976 in Case 43/75 Defrenne v Sabena [1976] ECR 455, paragraphs 12 and 39).
27 Employers and trustees cannot therefore be allowed to rely on the rules of their pension scheme, or those contained in the trust deed, in order to evade their obligation to ensure equal treatment in the matter of pay.
28 In so far as the relevant rules of national law prohibit them from acting beyond the scope of their powers or in disregard of the provisions of the trust deed, employers and trustees are bound, in order to ensure compliance with the principle of equal treatment, to use all the means available under domestic law, such as recourse to the national courts, especially where, as seems to be the case in this instance, involvement of the national courts is necesary to amend the provisions of the pension scheme or of the trust deed.
29 Furthermore, the Court has consistently held that national courts are bound to provide the legal protection which individuals derive from the direct effect of provisions of the Treaty (see the judgment of 19 June 1990 in Case C-213/89 The Queen v Secretary of State for Transport, ex parte Factortame Limited and Others [1990] ECR I-2433, paragraph 19). They are therefore bound, particularly in the context of Article 119, to the full extent of their discretion under national law, to interpret and apply the relevant domestic provisions in conformity with the requirements of Community law and, where this is not possible, to disapply any incompatible domestic provisions (see the judgment of 4 February 1988 in Case 157/86 Murphy and Others v Bord Telecom Eireann [1988] ECR 673, paragraph 11).
30 As regards the second part of the question, concerning the method to be used to achieve equal treatment, in paragraph 15 of the Defrenne judgment, cited above, where there was a claim in the main proceedings for compensation for discrimination in relation to pay, the Court ruled, in view of the connection between Article 119 and harmonization of working conditions while maintaining improvement, against the argument that compliance with Article 119 could be achieved otherwise than by raising the lowest salaries.
31 Moreover, in paragraphs 18 to 20 of its judgment of 7 February 1991 in Case
C-184/89 Nimz v Freie und Hansestadt Hamburg [1991] ECR I-297 the Court held that the national court must set aside any discriminatory provision of national law, without having to request or await its prior removal by collective bargaining or by any other constitutional procedure, and to apply to members of the disadvantaged group the same arrangements as those enjoyed by the other employees, arrangements which, failing correct implementation of Article 119 in national law, remain the only valid point of reference.
32 It follows that, once the Court has found that discrimination in relation to pay exists and so long as measures for bringing about equal treatment have not been adopted by the scheme, the only proper way of complying with Article 119 is to grant to the persons in the disadvantaged class the same advantages as those enjoyed by the persons in the favoured class.
33 The situation is different as regards periods of service completed after the entry into force of rules to eliminate discrimination, since Article 119 does not then preclude measures to achieve equal treatment by reducing the advantages of the persons previously favoured. Article 119 merely requires that men and women should receive the same pay for the same work without imposing any specific level of pay.
34 Finally, as regards periods of service prior to 17 May 1990, the date of the Barber judgment, it is sufficient here to say, as will be explained below in reply to the second question, that the Barber judgment excluded application of Article 119 to pension benefits payable in respect of those periods, so that employers and trustees are not required to ensure equal treatment as far as those benefits are concerned.
35 It follows that, as far as those latter periods are concerned, Community law imposed no obligation which would justify retroactive reduction of the advantages enjoyed by women.
36 The answer to be given to the second part of the first question must therefore be that in so far as national law prohibits employers and trustees from acting beyond the scope of their respective powers or in disregard of the provisions of the trust deed, they are bound to use all the means available under domestic law, such as recourse to the national courts, in order to eliminate all discrimination in the matter of pay. Moreover, as regards periods of service completed after the Court' s finding of discrimination but before the entry into force of the measures designed to eliminate it, correct implementation of the principle of equal pay requires that the disadvantaged employees should be granted the same advantages as those previously enjoyed by the other employees. However, as regards periods of service subsequent to the entry into force of those measures, Article 119 does not preclude equal treatment from being achieved by reducing the advantages which the advantaged employees used to enjoy. Finally, as regards periods of service prior to 17 May 1990, the date of the Barber judgment, Community law imposed no obligation which would justify retroactive reduction of the advantages enjoyed by the favoured employees.
Question 1(3)
37 The third part of the High Court' s first question concerns the respective liabilities of the employer and the trustees if it is established that the direct effect of Article 119 of the Treaty can be relied on against both the employer and the trustees.
38 Although Article 119 imposes on employers an obligation of result whereby men and women must receive the same pay for the same work, neither that article nor any other provision of Community law regulates the way in which that obligation is to be implemented by employers or by the trustees of an occupational pension scheme acting within the limits of their powers.
39 It follows that the national court, whose duty it is to ensure ultimate performance of the obligation of result, may, in order to do so, make use of all means available to it under domestic law. Thus, it may order the employer to pay additional sums into the scheme, order that any sum payable by virtue of Article 119 must first be paid out of any surplus funds of the scheme or order that the sums to which members are entitled must be paid by the trustees out of the scheme' s assets, even if no claim has been made against the employer or the employer has not reacted to such a claim.
40 The answer to the third part of the first question must therefore be that the national court is bound to ensure correct implementation of Article 119, taking due account of the respective liabilities of employers and trustees under the rules of domestic law.
Question 1(4)
41 The fourth part of the High Court' s first question concerns the effect on the answers to the first three parts if the funds held by the trustees for the purposes of equalizing benefits are insufficient.
42 The fact that there are difficulties in applying the principle of equal pay because the funds held by the trustees are insufficient or the employer cannot provide additional funds is a problem to be resolved in accordance with national law which cannot affect the answers given to the previous questions. However, as the United Kingdom rightly points out, the national law in question must be applied in accordance with the principle of equal pay.
43 The answer to the fourth part of the first question must therefore be that any problems arising because the funds held by the trustees are insufficient to equalize benefits must be resolved on the basis of national law in the light of the principle of equal pay and that such problems cannot affect the answers to the previous questions.
Question 2(1)
44 By the first part of the second question, the Court is asked to state the precise scope of the temporal limitation on the effects of the Barber judgment.
45 The Court has already pointed out in its judgment in the Ten Oever case, cited above, that the limitation in question was imposed in the specific context of benefits (in particular, pensions) provided for by private occupational schemes which were held to be pay within the meaning of Article 119 of the Treaty (paragraph 16).
46 That ruling took account of the fact that it is a characteristic of this form of pay that there is a time-lag between the accrual of entitlement to the pension, which occurs gradually throughout the employee' s working life, and its actual payment, which is deferred until a particular age (paragraph 17).
47 The Court also took into consideration the way in which occupational pension funds are financed and thus of the accounting links existing in each individual case between the periodic contributions and the future amounts to be paid (paragraph 18).
48 Given the reasons explained in paragraph 44 of the Barber judgment for limiting its effects in time, it must be made clear that equality of treatment in the matter of occupational pensions may be claimed only in relation to benefits payable in respect of periods of service subsequent to 17 May 1990, the date of the Barber judgment, subject to the exception in favour of workers or those claiming under them who have, before that date, initiated legal proceedings or raised an equivalent claim under the applicable national law (paragraph 19).
49 The answer to the first part of the second question must therefore be that by virtue of the Barber judgment the direct effect of Article 119 of the Treaty may be relied upon, for the purpose of claiming equal treatment in the matter of occupational pensions, only in relation to benefits payable in respect of periods of service subsequent to 17 May 1990, subject to the exception in favour of workers or those claiming under them who have, before that date, initiated legal proceedings or raised an equivalent claim under the applicable national law.
Question 2(2) and (3)
50 The second and third parts of the second question do not call for reply since they assume a different answer to the first part, namely that equal treatment may also be required in relation to benefits payable in respect of periods of service prior to 17 May 1990.
Question 2(4)
51 By the fourth part of the second question the Court is asked whether, and how, the temporal limitation on the effects of the Barber judgment applies to survivors' pensions.
52 As was pointed out above in paragraph 18, survivors' pensions provided for by occupational schemes fall within the scope of Article 119 of the Treaty.
53 Moreover, survivors' pensions are, like the determination of retirement age, among the exceptions provided for by Article 9 of Council Directive 86/378/EEC of 24 July 1986 on the implementation of the principle of equal treatment for men and women in occupational social security schemes (OJ 1986 L 225, p. 40). It was precisely the existence of those exceptions which led the Court to hold that the Member States and parties concerned were reasonably entitled to consider that Article 119 did not apply in this context and consequently to limit the effects in time of the Barber judgment (paragraphs 42 and 43).
54 That limitation is therefore also applicable to survivors' pensions.
55 Since a survivor' s pension is an advantage stemming from the survivor' s spouse' s membership of the occupational scheme, the pension vesting in the survivor by reason of the employment relationship between the employer and the survivor' s spouse, and since the pension is financed by contributions paid by the survivor' s spouse during that spouse' s working life, a survivor may claim equal treatment in this matter only in relation to periods of service subsequent to 17 May 1990.
56 The answer to the fourth part of the second question must therefore be that the limitation of the effects in time of the Barber judgment applies to survivors' pensions and that consequently equal treatment in this matter may be claimed only in relation to periods of service subsequent to 17 May 1990.
Question 2(5)
57 By the fifth part of its second question the national court asks whether, and how, the limitation of the effects in time of the Barber judgment applies to benefits payable under occupational social security schemes which are not linked to the length of actual service.
58 The problem for the national court relates, as appears from the file, to benefits such as a lump-sum payment in the event of an employee' s death during his employment.
59 Since such a benefit is payable solely by reason of an employment relationship existing at the time of the event triggering payment of the benefit, irrespective of the length of previous periods of service, the limitation of the effects in time of the Barber judgment applies only where that operative event occurred before 17 May 1990. After that date, such benefits must be granted in accordance with the principle of equal treatment without any need to distinguish between periods of service prior to the Barber judgment and periods of service subsequent to that judgment.
60 The answer to be given to the fifth part of the second question must therefore be that the limitation of the effects in time of the Barber judgment is applicable to benefits not linked to the length of actual service only where the operative event occurred before 17 May 1990.
Question 3
61 By its third question the High Court asks whether the Barber judgment, and more particularly the limitation of its effects in time, concern not only contracted-out occupational pension schemes but also non-contracted-out occupational pension schemes.
62 The Court has already held in its judgment of 14 December 1993 in Case C-110/91 Moroni v Collo GmbH [1993] ECR I-6591 that the Barber judgment also applies to the German type of supplementary occupational scheme at issue in that case.
63 However, in arriving at that conclusion, the Court, while accepting that the facts of Barber concerned a contracted-out occupational scheme, pointed out that, in ruling that pensions paid under such a scheme fell within the scope of Article 119, it had applied the same criteria as those to which it had referred in its earlier case-law to distinguish statutory social security schemes from occupational pension schemes (paragraphs 12 and 13).
64 Thus, in paragraphs 7 and 8 of its judgment of 25 May 1971 in Case 80/70 Defrenne v Sabena [1971] ECR 445, the Court held that the concept of pay could not cover social security schemes or benefits, such as retirement pensions, which were directly governed by statute to the exclusion of any element of negotiation within the undertaking or occupational sector concerned, and which were obligatorily applicable to general categories of workers. Such schemes give workers the benefit of a statutory scheme, to whose financing the contributions of workers, employers and possibly the public authorities are determined not so much by the employment relationship between employer and workers as by considerations of social policy.
65 In its judgment of 13 May 1986 in Case 170/84 Bilka-Kaufhaus GmbH v von Hartz [1986] ECR 1607, concerning a German occupational scheme, the Court held that, although adopted in accordance with the provisions laid down by German legislation, the scheme was the result of negotiation between the employer and the employees' representatives, supplemented the statutory social security scheme and received no financial support from the State. A scheme with such characteristics therefore fell within the scope of Article 119 of the Treaty.
66 There is no doubt that all those identifying characteristics are likewise present in non-contracted-out occupational schemes.
67 Such schemes are also the result of negotiation between employers and employees or their representatives, or of a unilateral decision of the employer. They are also funded entirely by the employer or by both the employer and the employees, with no contributions from the State.
68 Furthermore, such schemes are not compulsory for general categories of workers. They concern only the workers employed by particular undertakings, membership of the schemes flowing automatically from the employment relationship with a specific employer. Finally, although the schemes in question are set up in accordance with national legislation, they are governed by their own specific rules.
69 Lastly, the Court dealt in the Barber judgment for the first time with the question of how inequality of treatment arising from the setting of different retirement ages for each sex was to be assessed with reference to Article 119. There is no question that such differentiation is not peculiar to contracted-out occupational schemes. On the contrary, it is to be found in other types of occupational schemes and produces the same discriminatory effects.
70 It follows that the scope of the principles laid down in the Barber judgment cannot be regarded as being limited to contracted-out occupational schemes and that those principles also concern non-contracted-out occupational schemes like the German type of supplementary occupational scheme dealt with in the Moroni judgment cited above.
71 The answer to the third question must therefore be that the principles laid down in the Barber judgment, and more particularly the limitation of its effects in time, concern not only contracted-out occupational schemes but also non-contracted-out occupational schemes.
Question 4
72 The essence of the High Court' s fourth question is whether Article 119 precludes actuarial factors differing according to sex from being taken into account in occupational pension schemes and, if so, how the limitation of the effects in time of the Barber judgment applies in this context.
73 The actuarial factors in question are essentially those linked to demographic assumptions. Since women live on average longer than men, their future pensions are more costly than those of men and require the employer to pay higher contributions.
74 As a result of such actuarial factors being taken into account, the sums to which male employees are entitled, in particular where part of the pension is converted into a capital sum or where acquired rights are transferred, are lower than those to which female employees are entitled.
75 In answering the question whether such differences are compatible with Article 119, the first question is whether transfer benefits and capital-sum benefits constitute pay within the meaning of that article.
76 In its judgment of 22 December 1993 in Case C-152/91 Neath v Hugh Steeper Ltd [1993] ECR I-6935, the Court has already ruled that the use of actuarial factors differing according to sex in funded defined-benefit occupational pension schemes does not fall within the scope of Article 119 of the Treaty.
77 In arriving at that conclusion the Court first reiterated that the concept of pay, within the meaning of the second paragraph of Article 119, comprises any consideration, whether in cash or in kind, whether immediate or future, provided that the worker receives it, albeit indirectly, from his employer in respect of his employment (paragraph 28).
78 It then found that the assumption underlying that approach was that the employer commits himself, albeit unilaterally, to pay his employees defined benefits or to grant them specific advantages and that the employees in turn expect the employer to pay them those benefits or provide them with those advantages. Anything that is not a consequence of that commitment and does not therefore come within the corresponding expectations of the employees falls outside the concept of pay (paragraph 29).
79 In the context of defined-benefit occupational pension schemes, such as those in question in the Neath case and in the present case, the employer' s commitment to his employees concerns the payment, at a given moment in time, of a periodic pension for which the determining criteria are already known at the time when the commitment is made and which constitutes pay within the meaning of Article 119. However, that commitment does not necessarily have to do with the funding arrangements chosen to secure the periodic payment of the pension, which thus remain outside the scope of Article 119 (paragraph 30).
80 Since the schemes involved are contributory schemes, that funding is provided through the contributions paid by the employees and those paid by the employers. The contributions paid by the employees are an element of their pay since they are deducted directly from their salaries, which, by definition, constitute pay (see the judgment of 11 March 1981 in Case 69/80 Worringham and Humphreys v Lloyds Bank [1981] ECR 767). The amount of those contributions must therefore be the same for all employees, male and female, which is indeed so in the instant case. This is not so in the case of the employer' s contributions which ensure the adequacy of the funds necessary to cover the cost of the pensions promised, so securing their payment in the future, that being the substance of the employer' s commitment (paragraph 31).
81 The Court accordingly concluded that, unlike periodic payment of pensions, inequality of employers' contributions to funded defined-benefit schemes, due to the use of actuarial factors differing according to sex, is not struck at by Article 119 (paragraph 32).
82 The Court considered that this conclusion necessarily extended to the specific aspects raised in the questions submitted, which, as in the present case, concerned the conversion of part of the periodic pension into a capital sum and the transfer of pension rights, whose value depends on the funding arrangements that are chosen (paragraph 33).
83 In order to provide a complete reply to the High Court' s questions it must be added that in the other two situations under consideration, namely where a reversionary pension is payable to a dependant in return for the surrender of part of the annual pension and where a reduced pension is paid when the employee opts for early retirement, the funding arrangements chosen must also be taken into account. Since those arrangements are not covered by Article 119, any inequality of the amounts of those benefits, arising from the use of actuarial factors in the funding of the scheme, is not struck at by that article.
84 That being so, the part of the fourth question relating to the possible application to the present case of the limitation of the effects in time of the Barber judgment does not call for reply.
85 The answer to the fourth question must therefore be that the use of actuarial factors varying according to sex in funded defined-benefit occupational pension schemes does not fall within the scope of Article 119 of the Treaty. Consequently, inequalities in the amounts of capital benefits or substitute benefits whose value can be determined only on the basis of the arrangements chosen for funding the scheme are likewise not struck at by Article 119.
Question 5(1)
86 By the first part of its fifth question the High Court asks whether the principle of equal treatment laid down in Article 119 applies to all pension benefits paid by occupational schemes or whether a distinction is to be drawn according to the kind of contributions to which those benefits are attributable, namely employers' contributions or employees' contributions, the latter being either compulsory or voluntary.
87 In the Barber judgment the Court held that pensions paid by occupational schemes constitute a consideration offered to workers by the employer by reason of the workers' employment. They are therefore to be regarded as pay within the meaning of Article 119 since they are wholly financed by the employer, or by both the employer and the workers, without any contribution on the part of the public authorities in any circumstances (paragraph 25).
88 It follows that Article 119 applies to all benefits payable to an employee by an occupational pension scheme, irrespective of whether the scheme is contributory or non-contributory. Whether contributions are payable by the employer or the employees has no bearing on the concept of pay when applied to occupational pensions, which must conform to the principle of equal treatment in their entirety, whatever the source of their funding.
89 This is so here a fortiori since the documents show that, as a matter of accounting, once the employer' s and the employees' contributions have been paid into the scheme, they are managed as a single fund and it is no longer possible to distinguish them.
90 However, the situation is different in the case of additional voluntary contributions paid by employees to secure additional benefits such as, for example, an additional fixed pension for the member or the member' s dependants, an additional tax-free lump sum or additional lump-sum benefits on death.
91 The order for reference shows that these additional benefits are calculated separately, solely on the basis of the value of the contributions paid, which are credited to a special fund managed by the trustees as a distinct fund, separate from that created by the employer' s and employees' contributions under the normal occupational pension scheme.
92 Given also the fact that, as the order for reference again shows, section 12 of the Social Security Act 1986 requires occupational schemes only to provide the necessary administrative framework to enable members who so wish to pay additional contributions to secure benefits additional to those which they are entitled to expect by reason of their employment, such benefits cannot be regarded as pay within the meaning of Article 119.
93 The answer to the first part of the fifth question must therefore be that the principle of equal treatment laid down in Article 119 applies to all pension benefits paid by occupational schemes, without any need to distinguish according to the kind of contributions to which those benefits are attributed, namely employers' contributions or employees' contributions. However, in so far as an occupational pension scheme does no more than provide the membership with the necessary arrangements for management, additional benefits stemming from contributions paid by employees on a purely voluntary basis are not covered by Article 119.
Question 5(2)
94 The essence of the second part of the High Court' s fifth question is whether, 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.
95 The rights accruing to the worker from Article 119 cannot be affected by the fact that he changes his job and has to join a new pension scheme, with his acquired pension rights being transferred to the new scheme.
96 Consequently, when the worker enters retirement he is entitled to expect the scheme of which he is then a member to pay him a pension calculated in accordance with the principle of equal treatment.
97 Where, particularly in consequence of insufficient funding, this does not happen, the paying scheme should in principle do everything to bring about a situation of equality, if need be by making a claim under national law for the necessary additional sums from the scheme which made an inadequate transfer.
98 However, since in the Barber judgment the Court limited the direct effect of Article 119 so as to allow it to be relied upon in claims for equal treatment in the matter of occupational pensions only in relation to benefits payable in respect of periods of service subsequent to 17 May 1990, neither the scheme which transferred rights nor the scheme which accepted them is required to take the financial steps necessary to bring about a situation of equality in relation to periods of service prior to 17 May 1990.
99 The answer to the second part of the fifth question must therefore be that 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.
Question 6
100 By the sixth question the High Court asks whether Article 119 is also applicable to schemes which have at all times had members of only one sex.
101 In its judgment of 27 March 1980 in Case 129/79 Macarthys Ltd v Smith [1980] ECR 1275 the Court held that comparisons in cases of actual discrimination falling within the scope of the direct application of Article 119 are confined to parallels which may be drawn on the basis of concrete appraisals of the work actually performed by employees of different sex within the same establishment or service (paragraph 15).
102 The Court accepted that such comparisons are also possible between workers of different sex performing the same work but at different periods. In such a case, however, it will be for the national court to decide whether any difference of treatment may be explained by factors which are unconnected to any discrimination on grounds of sex (paragraphs 11 and 12).
103 It follows that a worker cannot rely on Article 119 in order to claim pay to which he could be entitled if he belonged to the other sex in the absence, now or in the past, in the undertaking concerned of workers of the other sex who perform or performed comparable work. In such a case, the essential criterion for ascertaining that equal treatment exists in the matter of pay, namely the performance of the same work and receipt of the same pay, cannot be applied.
104 The answer to the sixth question must therefore be that Article 119 of the Treaty is not applicable to schemes which have at all times had members of only one sex.
Decision on costs
Costs
105 The costs incurred by the Danish, Dutch and German Governments, Ireland, the United Kingdom and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court.
Operative part
On those grounds,
THE COURT,
in answer to the questions submitted to it by the High Court of Justice, by order of 23 July 1991, hereby rules:
1. The direct effect of Article 119 of the EEC Treaty may be relied on by both employees and their dependants against the trustees of an occupational pension scheme who are bound, in the exercise of their powers and performance of their obligations as laid down in the trust deed, to observe the principle of equal treatment.
2. In so far as national law prohibits employers and trustees from acting beyond the scope of their respective powers or in disregard of the provisions of the trust deed, they are bound to use all the means available under domestic law, such as recourse to the national courts, in order to eliminate all discrimination in the matter of pay.
3. As regards periods of service completed after the Court' s finding of discrimination but before the entry into force of the measures designed to eliminate it, correct implementation of the principle of equal pay requires that the disadvantaged employees should be granted the same advantages as those previously enjoyed by the other employees. However, as regards periods of service subsequent to the entry into force of those measures, Article 119 does not preclude equal treatment from being achieved by reducing the advantages which the advantaged employees used to enjoy. Finally, as regards periods of service prior to 17 May 1990, the date on which the judgment in Case C-262/88 Barber v Guardian Royal Exchange Assurance Group was delivered, Community law imposed no obligation which would justify retroactive reduction of the advantages enjoyed by the favoured employees.
4. The national court is bound to ensure correct implementation of Article 119, taking due account of the respective liabilities of the employers and trustees under the rules of domestic law.
5. Any problems arising because the funds held by the trustees are insufficient to equalize benefits must be resolved on the basis of national law in the light of the principle of equal pay and such problems cannot affect the answers to the previous questions.
6. By virtue of the Barber judgment the direct effect of Article 119 of the Treaty may be relied upon, for the purpose of claiming equal treatment in the matter of occupational pensions, only in relation to benefits payable in respect of periods of service subsequent to 17 May 1990, subject to the exception in favour of workers or those claiming under them who have, before that date, initiated legal proceedings or raised an equivalent claim under the applicable national law.
7. The limitation of the effects in time of the Barber judgment applies to survivors' pensions and consequently equal treatment in this matter may be claimed only in relation to periods of service subsequent to 17 May 1990.
8. The limitation of the effects in time of the Barber judgment is applicable to benefits not linked to the length of actual service only where the operative event occurred before 17 May 1990.
9. The principles laid down in the Barber judgment, and more particularly the limitation of its effects in time, concern not only contracted-out occupational schemes but also non-contracted-out occupational schemes.
10. The use of actuarial factors varying according to sex in funded defined-benefit occupational pension schemes does not fall within the scope of Article 119 of the Treaty. Consequently, inequalities in the amounts of capital benefits or substitute benefits whose value can be determined only on the basis of the arrangements chosen for funding the scheme are likewise not struck at by Article 119.
11. The principle of equal treatment laid down in Article 119 applies to all pension benefits paid by occupational schemes, without any need to distinguish according to the kind of contributions to which those benefits are attributed, namely employers' contributions or employees' contributions. However, in so far as an occupational pension scheme does no more than provide the membership with the necessary arrangements for management, additional benefits stemming from contributions paid by employees on a purely voluntary basis are not covered by Article 119.
12. 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.
13. Article 119 of the Treaty is not applicable to schemes which have at all times had members of only one sex.