The Pensions Advisory Service (TPAS) - Pension Rights

Part-timers

Background

Historically part time work has been carried out by women and, until relatively recently, part timers were often excluded from occupational pension scheme membership.

Various high profile court cases in the past (see below) have determined that it is unlawful to exclude part-timers from occupational pension schemes on the grounds of indirect sex discrimination.

In practice this means that for example, if an employer has more women part-timers then men and excludes part-timers from the pension scheme, then this could be seen as indirect sex discrimination. This would also work the other way around but in the past more women have been part time than men. Part-timers who are or have been excluded from pension scheme membership have to argue that they were discriminated against. Furthermore following the EU Part-Time Workers Directive a part-time worker must be treated no less favourable than a 'comparable' full-timer. This means that unless employers can objectively justify exclusion, part-time employees have to be provided with access to pension schemes on a no less favourable basis than their full-time counterparts.

If the employer rejects the claim and can justify part-timers' exclusion from the pension scheme on objective grounds, then any claim might be unsuccessful. However, it is likely to be difficult for the employer to provide convincing grounds for exclusion.

ECJ Part-timer Cases

Following our entry into the European Union we were required to comply with Article 119 of the Treaty of Rome (now Article 141EC) which sets out the principle of 'equal pay for equal work'.

The UK was required to introduce domestic legislation to this effect which was in turn to have an impact on equal treatment in relation to occupational pension scheme membership in the years that followed.

Hence the introduction of the Equal Pay Act 1970. This act was introduced to prohibit unequal pay between the sexes. The act also incorporates the time limits under which a claim must be made. A claim can be made at any time during the employment to which the claim for unequal pay relates (or within 6 months after leaving). However the claim can only relate to the pay lost during the 2 years previous to the claim date.

It has since been clarified that pensions are deferred pay and therefore pensions need to be equalised. This was highlighted in the case of Bilka-Kaufhaus outlined below and Barber v Guardian Royal Exchange (the 'Barber Judgement'). Sex equalised benefits must now be provided from the date of the Barber Judgement, 17 May 1990 . The Barber case raised as many questions as it answered and it did not require part-timers to be treated as full-timers.

In the years that followed the introduction of the Equal Pay Act 1970 a number of key cases were brought before the European Court of Justice (ECJ) in relation to part-timers.

The Bilka-Kaufhaus case in 1986 concerned a complaint by a part-time female employee who had been excluded from her employer's pension scheme as she was a part-timer. The scheme was only open to part-timers if they satisfied certain conditions that could not be met by the complainant. She claimed indirect discrimination to the ECJ. The ECJ held that membership of a scheme was within Article 119 of the Treaty of Rome and that exclusion of part-timers was in breach of Article 119 if it affected a higher number of female employees than male employees and vice versa. The employer would have a case if the exclusion was objectively justified and not on the grounds of sex. It also said that an employer could justify a policy that excluded part timers of either sex on the basis that it wished to employ as few part timers as possible provided the means chosen were appropriate and necessary to achieving that objective.

Also, on 28 September 1994 the European Court of Justice (ECJ) found in the Dutch cases of Vroege and Fisscher that exclusion of part-time employees from pension schemes could constitute indirect sex discrimination unless the employer could justify the exclusion on the basis of 'objectively justified factors unrelated to any discrimination on grounds of sex'. The court also held that this right of access could be backdated as far as 8 April 1976 . (see Defrenne V Sabena). The right to membership of an occupational pension scheme therefore falls within the scope of article 119 of the Treaty of Rome.

A plethora of British part-timer cases brought before Employment Tribunals around this time generated concern that the two time limits as introduced by the Equal Pay Act 1970 could in fact be unlawful. In the months that followed approximately 60,000 part-timers lodged claims in respect of backdated membership of their employer's pension schemes for longer periods. In all these cases it was upheld that the two year backdating limit and the 6 month after leaving time claim were correct.

Following appeal on a handful of these cases to the Employment Appeals Tribunal and the Court of Appeal, the House of Lords referred the cases to the ECJ for clarification.

Preston v Wolverhampton & Others

On 16 May 2000 , the ECJ declared in the case of Preston v Wolverhampton and Others that the principle of effectiveness precluded a national procedural rule stating that claims were limited to two years backdating. This in effect meant that part-timers claims could be backdated to the date employment commenced or 8 April 1976 if later.

The date of 8 April 1976 related to the date of judgement in the Defrenne v Sabena case where the ECJ decided that if Article 119 was breached in respect of 'equal pay for equal work' employees could take action directly against their employers to enforce it.

The ECJ said that employees would be required to pay contributions in respect of all periods of part-time employment for which they seek benefit. This is not the case if the scheme is non contributory.

N.B The Pensions Act 1995 inserted an overriding equal treatment rule into all occupational pension schemes. This means that where part-timers were excluded due to discrimination after 31 May 1995 , access to the scheme cannot be denied. The regulations dictated that employers should be liable to pay all contributions (including the member's) where the court or tribunal finds there has been a breach of the equal treatment rule.

On 8 February 2001 the House of Lords confirmed that retroactive admission to occupational pension schemes could be claimed back as far as 8 April 1976 and upheld that claims must be lodged with an Employment Tribunal within six months of the end of employment.

It is important to note that the Preston case did not decide that all claims must succeed, it was merely a test on the legality of the time limits. An Employment Tribunal must now apply the House of lord's ruling when deciding each and every claim.

Uppingham School v Shillcock

In October 1997 the Pensions Ombudsman upheld a complaint that an employee had been denied membership of a pension scheme as the employer had determined that employees earning less than the lower earnings limit were not eligible. The rule adversely affected a much higher proportion of woman than men. The Pensions Ombudsman determined that there had been indirect sex discrimination and directed the employer to admit her with three years' retrospective membership. The employer and the trustees of the pension scheme appealed to the High Court.

On 19 April 2002 the High Court ruled on Uppingham School v Shillcock and overturned the Pensions Ombudsman's Determination. The judge ruled that there is no indirect sex discrimination provided the lower earnings limit offset applies equally to all employees whether full or part time, male or female. The judge accepted the purpose of the lower earnings limit offset was to achieve a broad integration between state and occupational scheme benefits.

In addition it was the view of the High Court in this case that the Pension Ombudsman's three year backdating limit was inappropriate. This was in light of the rulings made in the Preston case regarding part-timers. However as the appeal was upheld and therefore backdated pension rights were not granted a definitive ruling was not made. It follows from this that the Pensions Ombudsman three year limit regarding part-timers may be open to challenge in the future.

EU Part-Time Workers Directive

Furthermore the UK Government adopted the EU Part-Time Workers Directive. The Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 therefore came into effect on 1 July 2000 . Prior to the introduction of these regulations claims for part-timers had to be on the basis of indirect sex discrimination. To prove indirect sex discrimination there must be a significant and relevant difference between the man's case and the woman's case. This could be demonstrated by a greater number of one sex being unfavourably treated in comparison with the other sex as is often the case with part-timers. However the new regulations require a part-time worker to be treated no less favourably than a 'comparable' full-timer. Also the calculation of benefits for part-time workers must now be on a pro rata basis of the calculation of benefits for full-time workers.

This means that unless employers can objectively justify exclusion, part-time employees have to be provided with access to pension schemes on a no less favourable basis than their full-time counterparts.

Under the new Regulations, employers cannot deny access to both male and female part-time workers, unless different treatment is justified on objective grounds. Scheme rules may need to be revised, to ensure that they comply with the new legislation.

Employment Tribunals can therefore expect to deal with further test cases that cover the clarification of 'objective justification'.

It is thought that less favourable treatment will only be justified on objective grounds if it can be shown that the less favourable treatment:

is to achieve a legitimate objective
is necessary to achieve that objective; and
is an appropriate way to achieve that objective.

In order for a claim to be made, part-timers will need to identify a comparable full-timer who is receiving more favourable treatment. There are several tests to establish who is a comparable full-timer. The part-timer must:

work for the same employer as the full-timer
do the same or broadly similar work (taking into account experience and skills where relevant) as the full-timer, and
work under the same kind of contract as the full-timer.

There is also protection for workers who return to a part-time job from a job they previously did full-time. In this scenario the worker would compare the worker's treatment with that under the previous full-time employment (without the need for another full-time comparator).

This legislation applies to employers, and not directly to trustees and therefore the onus is placed on the employee to present their case to an employment tribunal.

These regulations provide that complaints to the tribunal will need to be presented within three months of the last day on which the worker was unfavourably treated. However the tribunal has discretion to consider a complaint made out of time if it considers it just and equitable to do so. In addition where a tribunal finds that the complainant has been treated less favourably then any order that the tribunal makes must not relate to a period earlier than two years before the date on which the complaint was presented.

These time limits appear to be in conflict with the sex-discrimination time limits.

European Court of Justice ruling in Allonby : January 2004

The Allonby ruling found that there was no need for part time employees to name a comparator when seeking access to an occupational pension scheme operated by the state (e.g. Teachers' Pensions Scheme, National Health Service Pension Scheme, Local Government Superannuation Scheme).

Firefighters Case

A recent example of 'successful' objective justification was that of Matthews & Others v Kent and Medway Towns Fire Authority and Others 02/07/04 concerning retained firefighters.

The Employment Tribunal decision was upheld at Court of Appeal.

In this case retained firefighters were employed under the same type of contract as their full-time colleagues, but they were not engaged in the same or broadly similar work, and therefore were not entitled to the same pension and sick pay benefits.

How to Lodge a Claim

In accordance with the ruling in the Preston case to lodge a claim for backdated pension rights you must do so either before you leave the employment to which the claim relates or within six months of leaving. If the case is accepted the tribunal may consider granting backdating to 8 April 1976 or the date the claimant commenced the relevant employment, whichever is the later.

To lodge a claim you will need to complete form ET1 and submit this to the tribunal. You can obtain this form and guidance on how to lodge a claim from a Citizens Advice Bureau, trade union or local office of the Employment Tribunal. You should also write to your employer to advise them of your claim.

If you left employment more than six months ago it is unlikely that you will be able to claim backdated membership in the pension scheme.

You may however consider making a complaint to the Pensions Ombudsman. He has a more generous time limit for making a claim (but less generous in terms of backdating). However he will only take a case if the period between the date he considers you knew (or should have known) about the problem and the date you make your complaint is less than 3 years. It may be difficult at this stage with all the publicity the issue has attracted to convince the Ombudsman that you are within this constraint.

If the Ombudsman does accept the complaint he can normally only award up to three years backdated service from the date the complaint was made to him (though any time spent using the scheme's internal dispute resolution procedure or consulting TPAS will usually be disregarded).

In a case brought to the Court of Appeal against a Pensions Ombudsman Determination (Trustees of Uppingham School v Mrs Shillcock) it was the view of the Court that the Pensions Ombudsman's three year backdating limit was inappropriate. This was in light of the rulings made in the Preston case regarding time limits. However the appeal was upheld and therefore as backdated pension rights were not granted a definitive ruling was not made on this point. It follows from this that the Pensions Ombudsman three year time limit regarding part-timers may be open to challenge in the future.

What you need to demonstrate to make a claim

You need to demonstrate that

you are still in relevant employment or lodged your claim within six months of leaving
you were employed for the period for which backdated membership is claimed
you were excluded from the pension scheme when a comparable full-time employee was not (however see Allonby case)
your exclusion from the scheme constituted 'indirect sex discrimination'

If you are claiming under the Part-time Workers (Prevention of Less Favourable Treatment) Regulations that came into force on1 July 2000 you do not need to prove indirect discrimination, the fact that you were excluded from membership because of your part-time status will be enough.

It is then up to the employer, if it wished to do so, to prove that the exclusion of part-time employees from the scheme was genuinely due to a factor, other than the sex of the claimant, that could be 'objectively justified'

Other Points

If a transfer payment has been made to another arrangement then it may be permissible to pay a second transfer value relating to the enhanced benefits.

Trustees may ask part-timers for interest on backdated contributions. There is currently no standard level of interest though we believe a reasonable approach would be to require contributions plus interest at the Bank of England base rate to be paid.

It should be noted that the Pensions Act 1995 inserted an overriding equal treatment rule into all occupational pension schemes. This means that where part-timers were excluded due to discrimination after 31 May 1995 , access to the scheme cannot be denied. The regulations dictated that employers should be liable to pay all contributions (including the member's) where the court or tribunal finds there has been a breach of the equal treatment rule.

Part-timers, in time for bringing a claim, should therefore not be asked to contribute for service after 31 May 1995 , assuming the employer is not challenging the fact that there was discrimination, or arguing that there were objective grounds for exclusion.

Further information

The Pension Service publish a leaflet entitled 'Backdating membership of an occupational pension scheme. What this might mean for you' this can be obtained by calling 08457 31 32 33 or visiting their website at www.pensionservice.gov.uk.

In addition for an update on the recent rulings of the Employment Tribunal their website can be visited at www.employmenttribunals.gov.uk.

Q & As

I think I have a claim, what do I do now?

If you are still in the relevant employment to which your claim relates or left that employment within the last 6 months you should lodge your claim with an Employment Tribunal.

To lodge a claim you will need to complete form ET1 and submit this to the tribunal. You can obtain this form and guidance on how to lodge a claim from a Citizens Advice Bureau, trade union or local office of the Employment Tribunal. You can get a list of Employment Tribunal offices from visiting www.employmenttribunals.gov.uk. You should also write to your employer to advise them of your claim.

What is an employment tribunal?

The majority of Employment Law claims have to be brought in the Employment Tribunals (Formerly Industrial Tribunals). Employment Tribunals resolve disputes between employers and employees over employment rights. The idea behind Tribunals is that they should be quicker, cheaper and more accessible than the Court system. The panels who hear employment cases also have specialist knowledge and experience of employment law.

Will TPAS help me prepare my case to an Employment Tribunal?

This is not within our remit. TPAS cannot deal with a case once legal proceedings have commenced. You should consider seeking legal opinion. We can however give general help and advice on any aspect of your pension before you lodge a claim.

Where can I get help with my ET1 application?

You should contact your local Citizens Advice Bureau, Union, or your local offices of the Employment Tribunal. You could also request a leaflet entitled 'How to apply to an Employment Tribunal' by telephoning the Employment Tribunal Service on 0845 795 9775.

I left my employer ten years ago - can I claim?

You need to make a claim within 6 months of leaving employment. This was clarified by the ECJ in the case of Preston v Wolverhampton & Others.

But this seems unfair, I was not aware of the time limits, an old work colleague happened to mention it in passing.

You may consider making a complaint to the Pensions Ombudsman. He has a more generous time limit for making a claim (but less generous in terms of backdating). However he will only take a case if the period between the date he considers you knew (or should have known) about the problem and the date you make your complaint is less than 3 years. It may be difficult at this stage with all the publicity the issue has attracted to convince the Ombudsman that you are within this constraint.

If the Ombudsman does accept the complaint, he can normally only award up to three years backdated service from the date the complaint was made to him (though any time spent using the scheme's internal dispute resolution procedure or consulting TPAS will usually be disregarded). Most cases will now not be within his time limits.

Should the employer have let me know that I may be entitled to claim/time limits?

There is no onus on the employer to advise you of your rights to claim backdated service as a part-timer. However, some employers have written to employees that are affected as a matter of good practice and to 'flush out' further possible claims at a later date.

I think I have a claim but what does the term 'objective justification' mean?

The Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 came into effect on 1 July 2000. Prior to the introduction of these regulations claims for part-timers had to be on the basis of indirect sex discrimination. To prove indirect sex discrimination there must be a significant and relevant difference between the man's case and the woman's case. This could be demonstrated by a greater number of one sex being unfavourably treated in comparison with the other sex as is often the case with part-timers. However the new regulations require a part-time worker to be treated no less favourably than a 'comparable' full-timer.

This means that unless employers can objectively justify exclusion, part-time employees have to be provided with access to pension schemes on a no less favourable basis than their full-time counterparts

It is thought that less favourable treatment will only be justified on objective grounds if it can be shown that the less favourable treatment:

is to achieve a legitimate objective;

is necessary to achieve that objective; and

is an appropriate way to achieve that objective.

Justification may include the fact that few part-timers actually wanted to join a pension scheme. You may need to show that you would have joined the scheme if you had been able to. Also in some cases lower paid workers would have been no better off by joining the scheme at the time if it meant that their state benefits would have been reduced.

Okay, so what is a comparator?

In order for a claim to be made, part-timers will need to identify a comparable full-timer who is receiving more favourable treatment. This is a 'comparator' (However Allonby case excludes public sector workers where they are members of state occupational scheme). There are several tests to establish who is a comparable full timer. The part-timer must:

work for the same employer as the full-timer
do the same or broadly similar work (taking into account experience and skills where relevant) as the full-timer, and
work under the same kind of contract as the full-timer.

So after all this why would I bother making a claim?

You could be losing valuable pensionable service, which in turn, will affect the amount of your eventual pension benefit when you retire.

My employer is allowing me backdated access but says I have to pay the member contributions. Is this correct?

Generally speaking, part-timers should (as far as possible) be put in the same position they would have been in, had they been members of the scheme all along. This means they must pay any members' contributions, which were due. Trustees may ask part-timers for interest on these contributions.

N.B. The Pensions Act 1995 inserted an overriding equal treatment rule into all occupational pension schemes. This means that where part-timers were excluded due to discrimination after 31 May 1995, access to the scheme cannot be denied. The regulations dictated that employers should be liable to pay all contributions (including the member's) where the court or tribunal finds there has been a breach of the equal treatment rule.

Interest? But that's not fair

Companies claim that extra contributions are needed to catch up with investment returns. In addition, the member has had use of the funds during the period that they were not members. It appears reasonable to TPAS that schemes should make some allowance for the fact that they are backdating contributions in some cases many years. If the trustees allowed contributions to be paid at a flat rate it may be tantamount to giving you a substantial tax free cash loan.

So what would be a reasonable rate of interest?

TPAS believe that a reasonable rate of interest would be to apply the Bank of England base rate. This has not at present been clarified. The Pensions Ombudsman, in a case determined on 27 June 2001, between Mrs J M Harris and the London Borough of Bromley decided that interest charges on backdated pension contributions should be in line with the rate of increase in the Retail Price Index.

I was part-time, when I was made full-time I had completed under 2 years service as a full time employee and received a refund of contributions. Can I claim?

Unless you left the relevant employment in the last six months it is unlikely you will be able to make a claim.
You may however consider making a complaint to the Pensions Ombudsman. He has a more generous time limit for making a claim (but less generous in terms of backdating). However he will only take a case if the period between the date he considers you knew (or should have known) about the problem and the date you make your complaint is less than 3 years. It may be difficult at this stage with all the publicity the issue has attracted to convince the Ombudsman that you are within this constraint.

In practice this means the Pensions Ombudsman will usually only be of use to part-timers (assuming they are making their first positive enquiry on the issue) where they left service more than six months, but less than three years, ago.

Even then, if the part-timer is no longer in service, and the period for which they claim membership is less than two years, they may have the problem that the only benefit they would get is a refund of contributions.

An example of this would be where a part-timer worked for an employer from 1 January 1992 to 31 December 1999. If the claim were made to the Pensions Ombudsman on 1 March 2001, the Ombudsman could only consider a claim from 1 March 1998 to 31 December 1999 (i.e. less than 2 years).

I am retired and drawing retirement benefits from my former employer's pension scheme. I have now been awarded back-dated membership of the scheme in respect of part-time service. Can I take part of the benefit as a tax-free lump sum?

Yes, but only if you commuted part of your original pension for a tax-free lump sum and the scheme rules allow an additional sum to be paid in circumstances such as yours. If the rules of your pension scheme provide for a separate tax-free lump sum (e.g. normally calculated as 3/80ths of pensionable salary for each year of service) in addition to a pension, you will automatically receive a further tax-free lump sum. You may be able to increase your pension as long as this is within HMRC limits.

My scheme is now closed to new members, can I claim backdated membership?

Yes, as long as when you would have been eligible to join the scheme when it was open to new members.

My scheme is in the process of being wound up, can I still claim backdated membership?

Probably, but this will depend on many factors, including whether or not the scheme has a deficit or surplus, and whether you would have been eligible to join the scheme before wind up commenced.

Do the scheme rules need to be changed or is the part-timers rule overriding legislation?

All legislation in respect of equal treatment is in effect overriding.

I contributed to a personal pension arrangement for the period that I could have been a member of the occupational pension scheme, what happens now?

Benefits held under personal pensions, or section 226 retirement annuity contracts, will usually be treated by HMRC as retained benefits, when calculating a part-timer's maximum benefits.

Retained benefits are pension benefits from other sources, For example, pensions payable from other occupational and private pension arrangements. Retained benefits are generally taken into account when assessing the overall maximum pension benefit that can be taken on retirement in accordance with HMRC rules. Retained benefits are usually only taken into account where special circumstances apply.

We do not believe there is any adverse consequence where you have effectively already made contributions to a pension arrangement for this period. Part-timers should still be able to backdate their contributions to the company scheme.

What if I was contracted out with the personal pension arrangement?

If you were not contracted-out for the relevant period, we believe the trustees should be able to reclaim the contracted-out rebates (for both employer and employee) from the Contracted-Out Employment Group (COEG).

If you operated a contracted-out personal pension for some (or all) of the period of backdating due, the scheme may wish to reduce its commitment to you (for example by reducing the benefit promise by the SERPS benefits due for the period). If benefits are reduced in this way, it would seem appropriate to reduce your member contributions (by the level of any contracted-out rebate due).

I am on a fixed term contract - am I affected?

The Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 were implemented on 1 October 2002. The broad aim of these regulations is to prevent fixed term employees from being treated less favourably than similar permanent employees. The same non-discrimination principles apply as per the part time regulations described above. However the non-discrimination principle can be applied by looking at the terms of the fixed-term employee's package as a whole. It may therefore be possible to apply less favourable treatment in respect of pension benefits, by virtue of providing the fixed term worker with a higher salary. These regulations are not retrospective which means that they took effect on 1 October 2002 and contributions cannot be backdated to 8 April 1976.

I have had a change of employer under TUPE so who has the liability for any backdated pension rights?

It was confirmed by the ET and by the Court of Appeal that liability does not transfer under TUPE, this means that any claim would relate to your previous employer. A claim must be made to an Employment tribunal within 6 months of the date of transfer.

The exception to this is where a transfer is made under what is known as a Statutory Novation. These cover transfers of NHS members from Health Authorities to NHS Trusts and employees of local Authorities to Further Education Colleges. Providing the employment subsisted on or straddled the transfer date in respect of all the past service of the employee, liability transfers to the new employer and the 6 month time limit runs from the date of cessation from that employer.

I voluntarily left my last employer, but both my last employer and my current employer are covered by the same pension scheme, what happens now?

The 6 month time limit runs from the date on which you left your last employer. Therefore a claim must be made within 6 months of the date you left your last employer.

I have had a succession of contracts with the same employer, can I make a claim?

If a stable employment relationship exists then you will need to make a claim 6 months from the date the employment relationship ended. An Employment Tribunal has laid down a detailed description of what constitutes a stable employment relationship and can be found at the Employment Tribunals website at www.employmenttribunals.gov.uk. The burden of proving, not merely the pattern of work but also any of the other factors necessary to demonstrate the existence of a stable relationship is upon the applicant.

It should be noted that new EC proposals regarding the rights of temporary workers may be implemented in the future.

I did not join my pension scheme when I was first eligible, can I make claim?

Your claim for backdated rights depends on whether entry to the scheme was compulsory or voluntary for a full-time comparator.

If entry was compulsory then you can make a claim. However if entry was voluntary you would have to satisfy an Employment Tribunal that, on the balance of probabilities, that you would have joined the scheme during the period of exclusion.

If on becoming eligible to join the scheme you did not do so because your employer did not inform you of your right to join the scheme, then your claim could include the additional period covered by your employers failure to inform you.

TPAS - The Pensions Advisory Service

Main navigation

Part-timers

Section navigation