On 1 March 2011, the European Court of Justice handed down its much awaited decision in Association belge des Consommateurs Test-Achats ASBL and others (Case C-236/09). It decided that from 21 December 2012 the exemption in the Council Directive 2004/113/EC which lets insurers use gender-related factors in determining premiums and benefits in insurance contracts is invalid.

The ruling clearly has direct implications for insurance companies (with knock-on effects for occupational pension schemes). But does it apply directly to occupational pension schemes?

The ECJ decision

In reaching its decision, the ECJ examined the following provisions of the Directive:

  • Article 5 (1) which prohibits insurance contracts entered into after 21 December 2007 from using gender specific factors when calculating insurance premiums and benefits.
  • The derogation in Article 5(2) which allows member states to exempt themselves from the prohibition if they satisfy certain requirements ("the Derogation"). This provision also required member states 5 years after the transposition of the Directive into national law (that is 21 December 2012) to re-examine their justification for adopting the Derogation.

The ECJ pointed out that the Directive was silent as to how long member states can rely on the Derogation for, so there was a risk that the Derogation could persist indefinitely. This would work against the aim of the Directive and the EU's principle of equal treatment of men and women and should be considered invalid on the expiry of an appropriate transitional period. This period, the court held would end on 20 December 2012 (effectively the end of the 5 year period after which the Directive required member states, who adopted the Derogation to review their justification for having it).


The ruling clearly has a direct impact on insurance companies for whom it will be unlawful to use gender-based factors in insurance contracts from 21 December 2012. Occupational pension schemes may however, be affected indirectly when they buy annuities (defined contribution schemes especially) as insurance companies re-price annuities based on unisex factors.

We consider that the decision may not place any immediate direct prohibitions on occupational pension schemes. The ECJ's decision and the ECJ's accompanying press release make it clear that the ruling applies to insurance contracts and the insurance services sector. In this regard, it is also important to recall the recitals to the Directive which state that:

  • the Directive applies "only to insurance and pensions which are private, voluntary and separate from the employment relationship"; and
  • other legal instruments exist "which implement the equal treatment principle in matters of employment and occupation and that the Directive does not apply in this field".

Occupational pension schemes are, of course, subject to the EU principles of gender equality and national legislation giving effect to those principles. The Equality Act 2010 in particular imposes an overriding sex equality rule on occupational pension schemes. Regulations under the Act, however, allow occupational pension schemes to use different actuarial factors for men and women when calculating benefits in a number of circumstances, including transfer values and commutation of a pension for a lump sum.

Member states who adopted to apply the Derogation (the UK included) must change domestic law so that from 21 December 2012, it complies with the decision. The Government is therefore expected to amend provisions in relation to insurance contracts to comply with the ruling. It is also likely that the Government may review the current exemptions allowing occupational pension schemes to use gender-based factors and possibly even remove those exemptions. Until such a review, we consider that occupational pension schemes can continue to rely on the current exemptions and use gender-based actuarial factors.

We will be considering further implications of the ECJ's ruling in future e-bulletins.