It is no longer generally open to employers to impose a compulsory retirement age on employees. Older employees are entitled to the same pension benefits as their younger colleagues unless any differences in treatment can be justified or are expressly exempt from the requirements of the Equality Act. One area which is causing some difficulty for pension scheme trustees is the provision of death in service benefits for those over age 65.
Many pension schemes provide death in service benefits, backed by a group life policy held in the name of the scheme trustees. As the law currently stands, insurance policies are not subject to age discrimination legislation and insurers can refuse cover, charge more or impose conditions in relation to older employees. In addition, the Equality Act now includes an exemption which allows an employer to exclude employees age 65 (or state pension age if lower) from a life cover policy where the policy “is provided to the employees in pursuance of an arrangement between the employer and another person”.
It is arguable that the effect of this is that employers and insurers need not provide cover for those over 65 (or state pension age) but trustees may be required to do so by the scheme rules (as there is no equivalent exemption on which they can rely). This would leave the trustees having to objectively justify any difference in cover for older members and this may prove difficult as the courts have been reluctant to allow justification on the grounds of cost alone.
We understand that the view of the Department for Business, Innovation and Skills (BIS) is that the employer exemption in the Equality Act is sufficiently wide to cover a policy in the name of the trustees where it forms part of the employee’s overall pay and benefits package. In our view the legislation is not clear on this point. Until this is clarified trustees should continue to take reasonable steps to provide the level of cover required under the scheme rules. Where full cover cannot be obtained (or not obtained without substantial additional cost or onerous conditions) trustees may take some comfort from the BIS view but should keep a record of the attempts they have made to secure cover (to assist in any future objective justification defence) and consider seeking an indemnity from the employer against any claims.