Lloyds Banking Group PLC, London, was ordered by a U.K. judge to overhaul its pension plan to guarantee equal benefits for men and women.
Judge Paul Morgan in London ruled the trustee of the pension plan had a duty to amend the terms of the plan, saying the issue has created uncertainties "for many years."
Three female members of the pension plan had claimed they were discriminated against because their retirement payments increase at a lower rate than male colleagues. About 230,000 members of the bank's defined benefit plan from 1990 to 1997 are affected and the ruling might stretch to about 7.8 million people in companies across the U.K., according to BTU, the union representing Lloyds employees. The union initially had estimated the cost could top £500 million ($657 million), after the ruling both the union and the bank put that figure at closer to £100 million.
"The essential questions raised by this claim are likely to be the same for the very many contracted-out defined benefit occupational pension schemes that provide guaranteed minimum pensions," Mr. Morgan said in a ruling Friday.
Lloyds said in a statement that it "welcomes the decision made by the court and the clarity it provides." The pension trustee had asked the court whether and how it's obliged to adjust pension benefits to compensate for unequal guaranteed minimum pensions earned by male and female members.
"This landmark judgment resolves this pension discrimination issue for good and will bring equality to millions of women across the country," Mark Brown, general secretary at BTU, said in a statement.
Samantha Brown, a pensions lawyer at Herbert Smith Freehills in London, said some estimates indicate FTSE 100 companies could take a "P&L hit of up to £15 billion pounds" as a result of the ruling.
But there is a silver lining, she said. "Employers will be relieved that the court stopped short of requiring schemes to adopt a gold-plated approach to equalization," Ms. Brown said. "Instead, the court approved a lower cost approach, balancing the interests of members and employers. It has left scope for trustees and employers to explore simpler options for achieving the necessary outcome."