The Government has published its response to its consultation on flexible retirement and pension provision.

In its response the Government suggests that the Employment Equality (Age) Regulations 2006 (the Age regulations) are intended to support the Government’s wider policy of ensuring that older people are given opportunities to continue to work and earn towards retirement, and not to ‘set impossible standards’.

As part of its response the Government has published draft regulations for consultation. These draft regulations aim to exempt certain flexible retirement practices from the prohibition against age discrimination in the Age Regulations. To this effect the draft regulations suggest two options.

Option 1 provides a wide exemption that renders lawful any scheme rule or practice that halts the accrual of or entitlement to any further benefits under the scheme for a member working under a ‘flexible retirement arrangement’, i.e. where the member has either reduced his working hours or his grade of seniority after becoming entitled to receive all or part of his age-related benefits under the scheme.

Under option 1 it is intended that schemes will be able to stop (in respect of members subject to a flexible retirement arrangement) providing:

  • further pension accrual in the scheme;
  • an actuarial uplift of pension not taken;
  • death in service benefits under the scheme; and
  • ill-health benefits under the scheme.  

Cessation of accrual would only be exempt where there is a complete cessation, not a reduction in the accrual rate, and would only be available for those who take flexible retirement after the regulations come into force.

Option 2 provides an alternative, more limited, exemption that would allow occupational pension schemes not to provide active members with death in service benefits where those members would also receive pensioner death benefits because they are working under a flexible retirement arrangement.

Under both options 1 and 2 there will be no need to objectively justify the flexible pension benefits practice if the exemptions apply.

The consultation closes 10 March 2009.