The Equality Bill (the Bill) was published on 27 April 2009. The aim of the Bill is to harmonise and modernise the anti-discrimination legislation, whilst progressing the law of equality. It amalgamates the existing laws relating to sex, age, religion, race, disability and sexual orientation into one comprehensive bill. The Bill therefore has wide implications, which not only impact employment relations but also existing pensions legislation.

Current legislation

There is a vast body of anti-discrimination legislation, including 32 acts, 52 statutory instruments, 16 European Commission directives and 13 codes of practice. Such legislation includes:

  • The Equal Pay Act 1970;
  • The Sex Discrimination Act 1974;
  • The Race Relations Act 1976;
  • The Disability Discrimination Act 1995; and
  • The Equality Act 2006.

What changes affect pensions?

The Bill mainly affects pension schemes with regard to age discrimination. Although a non-discrimination rule relating to age is currently implied in pension schemes’ documentation relating to age, disability, religion or belief and sexual orientation, the Bill provides a more extensive non-discrimination rule.

Age discrimination

The non-discrimination rule in the Bill extends non-discrimination to gender reassignment, marriage, civil partnerships and sex. The rule prohibits “a responsible person” from discriminating against, harassing or victimising a member or a person who could become a member of the pension scheme. A responsible person includes a scheme trustee or manager, or an employer. The rule does not apply to pension rights built up or benefits payable for periods of service before the Bill comes into force, where the current discrimination legislation will apply.

However, pension credit members with rights following pension sharing on divorce are not protected from discrimination because their rights are derived from an order of the court, rather than directly from their employment.

Where there has been a breach of a non-discrimination rule, proceedings may be brought against the person responsible for the breach under Part 9 of the Bill.

Sex equality

The Bill replicates the requirements of the Pensions Act 1995 by requiring that every occupational pension scheme shall have a sex equality rule read into it. The rule requires that men and women must be treated as favourably as comparable members of the opposite sex in relation both to the terms on which they are permitted to join the pension scheme, and to the terms on which they are treated once they have become pension scheme members.

The rule, insofar as it applies to the terms on which a person is treated once they have become a member of the pension scheme, does not apply to pensionable service before 17 May 1990. This was the date of the European Court’s decision in Barber v Guardian Royal Exchange Insurance Group [1991] 1 QB 344, which established that occupational pensions were pay for the purposes of Article 119 of the Treaty of Rome. Where the application of the rule relates to the terms on which a person becomes a member of the pension scheme, it has effect from 8 April 1976. This was the date of the judgment in Defrenne v Sabena [1976] 1 CR 547, where the European Court, in holding that the principle of equal pay was directly effective, indicated that Article 119 of the Treaty of Rome should not be applied to periods of service prior to the Defrenne judgment.

Maternity equality

The Bill also requires that every occupational pension scheme is to have a maternity equality rule read into it. The effect of the rule is that any period when a woman is on maternity leave should be treated as time when she is at work. In particular, in relation to any rule of an occupational pension scheme which can be applied in respect of:

  • scheme membership;
  • the accrual of scheme rights; or
  • the determination of benefits;

her employment is treated as continuous.

The requirement will also apply in relation to any discretion under scheme rules, in relation to the points listed above, which might potentially be exercised in a manner that treats a period of maternity leave differently from time when a woman is not on maternity leave. The Bill provides that any scheme rule falling foul of the actual or implied maternity equality rule will be modified to remove the inequality.

The woman’s contributions to the scheme during maternity leave need be determined only by reference to the amount she is paid during maternity leave. The provisions of the clause apply only to women on unpaid ordinary maternity leave where the expected week of confinement began on or after 6th April 2003, and only to a woman on unpaid additional maternity leave where the expected week of confinement began on or after 5th October 2008 and they do not apply to the accrual of scheme rights.

This requirement updates the current provisions on “unfair maternity provisions” in paragraph 5 of Schedule 5 to the Social Security Act 1989, whilst replicating and superseding aspects of Regulations 9 and 18A of the Maternity and Parental Leave etc Regulations 1999.

Non-discrimination alterations

The Bill provides that trustees and managers of an occupational pension scheme have the power, by resolution, to alter their scheme’s rules to conform with the non-discrimination requirements.

The power may be used if:

  • the trustees and managers do not have power under the scheme rules to alter the rules for that purpose; or
  • procedures for altering the rules are unduly complex or would cause delay.

This power is based on similar provisions which allow trustees and managers to secure conformity with the non-discrimination rules in the Disability Discrimination Act 1995, the Employment Equality (Religion or Belief) Regulations 2003, the Employment Equality (Sexual Orientation) Regulations 2003, and the Employment Equality (Age) Regulations 2006 (the Age Regulations).

Age exceptions

The Age Regulations provide for a number of exceptions to the general prohibition on treating actual and prospective pension scheme members differently based on age. Such exceptions include waiting periods, minimum and maximum entry ages, normal retirement dates, service-related contribution schedules and the use of age-based criteria in actuarial calculations (such as commutation and early retirement factors). The Bill will repeal all these exceptions and it is unclear as to how any replacement provisions will be framed.

What changes does the Bill not propose?

Representative actions

The Bill does not allow for representative action with regards to discrimination cases. There were suggestions that the Government would investigate the possibility of allowing representative bodies such as trade unions or the Equality and Human Rights Commission to take action on behalf of individuals claiming discrimination. However, no enabling provisions have been included in the Bill.

Default retirement age

Current anti-discrimination legislation provides that it is not unlawful to discriminate on the grounds of age if such discrimination can be objectively justified. Discrimination can be objectively justified if it is “a proportionate means of achieving a legitimate aim” (Age Regulations, regulation 3(1)).

The principle of objective justification was considered in the case of the Incorporated Trustees of the National Council (Age Concern England) v Secretary of State for Business, Enterprise and Regulatory Reform [2009] IRLR 373. The European Court of Justice (ECJ) held that the default retirement age in Britain was not in breach of the European Equal Treatment Framework Directive since it was objectively justifiable. The ECJ then left the High Court to determine whether the default retirement age was necessary and appropriate, and the High Court ruled that it was lawful and justified by the social policy aims relied on by the Government. However, the Government is proposing to review the default retirement age this year and has asked for businesses and individuals to submit their views on the default retirement age by 1 February 2010.

Current progress of the Bill

The Bill is currently in the House of Lords at the Committee stage. It is anticipated that it will receive Royal Assent in the spring of this year, by which time its full ambit (and hopefully the re-enactment of the age exemptions) should be clearer.