Discrimination against an employee on the grounds of their age by an employer is unlawful. In relation to pension schemes, however, certain practices that would otherwise be discriminatory are excluded from the scope of the Equality Act 2010.
In January 2017 the Tribunal found in a claim bought by a group of judges that transitional provisions to transfer their existing judicial pensions (based on solely on the date of birth of the judges) to a new judicial pension scheme were discriminatory, because younger judges would have less favourable benefits and therefore were treated less favourably because of their age.
By contrast, in February 2017 the Fire Brigades Union did not succeed in bringing a claim on the same grounds. The Tribunal concluded that the transitional pension arrangements were a proportionate means of achieving the aim of protecting those closest to pension age from the effects of pension reform. This decision is being appealed.
While the law on this point is currently unclear, employers are at risk of facing claims against them if they or the policies and practices they have in place discriminate on the grounds of age.
What amounts to age discrimination?
There are two types of discrimination:
- Direct discrimination - treating an employee less favourably than another on the grounds of age or apparent age.
- Indirect discrimination - applying a provision, criterion or practice ("PCP") which although age-neutral in theory, actually disadvantages workers of a particular age or age group.
A person bringing a claim for age discrimination must show that they have been treated less favourably than a comparator. This means they must identify another worker whose position is either the same, or not materially different from theirs to be used as a comparator. The requirement for an equivalent comparator offers protection to employers. For example, junior staff are unable to use senior staff as comparators, and therefore employers may be able to offer a better pension to more senior staff.
How to avoid a claim: test your policies
Employers and pension scheme trustees can take the following steps to help avoid having a claim bought against them:
1. Review the following documents for provisions and practices that may be discriminatory:
- Employment contracts (pension terms)
- Staff handbook
- Pension scheme trust deed and rules
- Member booklets
- Communication with members
- Discretionary practices
2. Consider whether any discriminatory provisions or practices fall under any of the exemptions.
The exemptions include:
- Waiting periods (for example, employees who are only entitled to a scheme benefit after serving a minimum period of service)
- Admission to schemes (for example, employers who set minimum and maximum ages for admission to a pension scheme)
Further exemptions, along with some qualifications to these exemptions, are set out in Schedule 1 of the Equality Age Exceptions.
3. Consider whether any discriminatory provisions, criterions or practices can be objectively justified.
This means that the PCP must be a proportionate means of achieving a legitimate aim. In cases of direct discrimination, the legitimate aim cannot purely be the employer's private interests, but must meet a social or employment policy aim.
Examples of legitimate aims include aims related to an employment policy, the labour market and vocational training objectives.
If a PCP can be objectively justified, then it will not be unlawful.
Any objective justifications should be recorded as fully as possible in writing with any supporting evidence.
If any potentially discriminatory provisions fall under the exemptions or can be objectively justified then they will not be unlawful.