Palacios de la Villa v Cortefiel

The ECJ has given judgment in this case referred to it by Spain. It held that a state default retirement age does fall within the scope of what is prohibited by the Directive - but that it is justified as a proportionate means of achieving the legitimate social aim of promoting employment opportunities and reducing unemployment.

Senor Palacios de la Villa challenged a Spanish law imposing a compulsory retirement age of 65 provided the individual had sufficient service to qualify for a pension (i.e. those who had not qualified for a pension could work longer).

The ECJ held that, although the provision was potentially directly discriminatory, the aim of promoting employment opportunities and reducing unemployment was a legitimate one; and because the policy took account of the fact that those subject to compulsory retirement were entitled to financial compensation by way of a pension that policy was reasonable. The arrangements were not "inappropriate or unnecessary for their purpose".

Comment: It seems slightly harsh that the fact that Senor Palacios qualified for a pension was seen as "compensation" for compulsory retirement (it seemed to be the only argument on the "proportionate means" limb of the justification case) - rather than deferred pay which he had earned over his career - and out of line with previous ECJ decisions on pensions. This judgment may not bode well for the Heyday case challenging the UK's default retirement age of 65.

Bloxham v Freshfields: Employment Tribunal decision

The Employment Tribunal (ET) has handed down its decision in the case of the former Freshfields partner who brought a claim based on age discrimination. The ET found that the less favourable treatment was based on age but that it was justified.

This is an employment rather than a pensions case, and as an ET decision it has no formal precedent value; however, it includes some useful arguments on less favourable treatment and on justification.


Mr Bloxham (B) is a former Freshfields (F) partner. F operated a generous "pay as you go" pension scheme for partners, which allowed retirement with consent from 50-54 (reduced for early payment) and without consent from 55. It was becoming clear that younger partners would have to fund pensions for the older generation without the expectation of a comparable pension themselves.

In late 2005 partners were consulted and it was decided the scheme was unsustainable and must be replaced. Following representations by some older partners and a partnership vote it was agreed that all partners aged over 50 would have until 31 October 2006 to retire on the old terms based on accrual to 30 April 2006. This would be subject to the usual reductions (which for someone retiring at 54 would be 20%). Members between 50 and 53 could defer drawing their pensions in order to reduce their discounts (which were between 25% and 40%). A new scheme came into force from 1 May 2006. Some retiring partners were to be offered consultancies.

In July 2006 B requested consent to retire (aged 54) under the transitional provisions; declined a consultancy; and elected to retire with effect from 31 October 2006, which he the did, taking his pension with a 20% discount. In November 2006 he presented his claim to the ET (mainly under regulation 17 of the Age Regulations, which concerns discrimination in relation to partners).


F argued that the "relevant act" took place when Mr B tendered his resignation in July 2006, before the Age Regulations came into force. It was held that the relevant act occurred over a period of time which continued after 1 October 2006. Pensions Claim

B argued that the 20% reduction amounted to less favourable treatment on grounds of age compared with a 55 year old who would not have suffered the reduction. The ET held that the application of the discount was based on 2 factors: the decision to have a transitional period between 30 April and 31 October 2006 and the age of the partners at 30 April 2006; this did constitute direct discrimination. However, the reform of the old scheme was a proportionate means of achieving a legitimate aim.

In our view the key factors in this finding were:

the arrangements as they stood discriminated against younger partners (so it was legitimate to consider changing them)

  • there was a finite pool of money - if Mr B won, someone else of a different age would suffer
  • there was extensive consultation and agreement
  • no one could put forward an alternative, less discriminatory, solution 
  • F aimed to mitigate the impact of the change through transitional arrangements and consultancies, although proposing the transitional provisions did not absolve F from considering other steps.

Comment: With regard to the 50-53 year-olds who had an option to defer, the ET seems to be saying that in going from employment to deferral to pensioner a person is in materially different circumstances from someone going straight from employment to pensioner. This may give strength to arguments for differential treatment between deferred pensioners and active members. However, as noted above, an ET decision is not a precedent and can therefore be at best of persuasive value.