EU law has for some time prohibited discrimination against scheme members on certain grounds like race and sex. Recently this has been extended to cover age and sexual orientation. The UK met the EU’s timeframe: the provisions on sexual orientation discrimination came into force on 1 December 2003, and those on age discrimination from 1 December 2006 (for pension schemes).
In both cases, the UK’s implementing regulations state that discrimination on the relevant ground is unlawful except in relation to benefits payable in respect of periods of pensionable service prior to the coming into force of the relevant regulations. Is this limit fair? A pension coming into payment after the cut off date may be calculated, at least in part, by reference to service before the cut off date. However, the discriminatory act of putting the pension into payment occurs entirely after the legislation came into effect and it would be possible to eliminate the discrimination for all periods of service (albeit at a cost) without having to unravel past pension payments. Two recent European cases cast doubt on the validity of the past service exemption in the UK’s age and sexual orientation regulations.
First, in the context of sexual orientation discrimination, is the case of Maruko. Tadao Maruko, who was in a relationship similar to a UK civil partnership with a member of a German scheme, was denied a survivor’s pension at the same level as would have been payable to a spouse. The European Court of Justice found in his favour and in response to a specific question concluded that although the Court may exceptionally restrict the extent to which a judgement is restricted in time, there was no justification for doing so in this case. Thus, Tadao Maruko’s pension related to the whole of his partner’s pensionable service, much of which preceded the coming into force of the German domestic legislation.
Under UK legislation, since the introduction of the status of civil partnership with effect from December 2005, schemes have been required to provide survivor’s benefits for civil partners in the same way as for spouses with effect from 5 December 2005 for all schemes and in respect of contracted-out rights accrued by service after 6 April 1988 only for contracted-out schemes. It is open for schemes to go further than this, but many schemes have not done so. The decision in Maruko suggests that it may be necessary to think again.
The second case concerned an age discrimination claim by Brigit Bartsch, who was denied a widow’s pension because she was more than 15 years younger than her husband. This claim was unsuccessful, in part because the member died before the implementation in German law of the age discrimination principle. However, the Advocate General’s opinion confirmed that limitations on the retroactivity of a judgement would be imposed only exceptionally and where there was a risk of serious economic repercussions and individuals and companies had been led to adopt practices which didn’t comply with EU legislation by reason of uncertainty regarding the implications of the legislation. As in Maruko, there was no justification for a limitation in time in this case. Because the ECJ turned down the claim on other grounds, the final judgement does not answer the question of whether a restriction in time should apply. However, we would expect it to be only a matter of time before this issue comes up again.
This could potentially have a bigger impact on UK pension schemes than Maruko (where the impact is limited by the fact that the numbers of members who enter into civil partnerships will probably be low). Some schemes may have historic practices such as operating different accrual rates for members of different ages. Even where this has been corrected for post-December 2006 service, there may still be grounds for claims. Note that these will not inevitably succeed – it is possible that the scheme and employer may be able to objectively justify a specific practice. Note in this context however that the opinion in Bartsch stresses the fact that to be justified the practice must not merely be intended to achieve a legitimate aim but also be proportionate, i.e. it must not go further than it is necessary to achieve the aim.
There is no immediate need for schemes to take action pending confirmation as to whether any action is likely to be taken by the UK government. However, schemes with benefit structures that have discriminated in the past may wish to note the potential for future claims and in particular, marshal any objective justification arguments which may be available to them.