The Equality Act 2010 makes it unlawful to discriminate against
employees because of their age. The Act replaces previous
Regulations which have protected members and prospective members of
pension schemes from being treated unequally, on the grounds of
age, by their sponsoring employers and trustees of pension
arrangements since 1 December 2006.
Retirement Age
Previous regulations allowed employers to set a default
retirement age (i.e. force employees to stop work) at 65 or
higher. However, it was unlawful to set a retirement age
under 65 or retire an employee who is under 65 (or the employer's
alternative selected retirement age if different), unless it was
'objectively justified' (see below). A default
retirement age at which employers could force their employees to
stop work is different from the 'normal retirement age' in a
pension scheme at which benefits can be taken.
Default retirement ages are now unlawful. From 1 October 2011,
employers are not able to compulsorily retire their employees
unless the retirement can be 'objectively justified' (see
below).
What is meant by objectively justified?
An objective justification allows an employer to set
requirements that are discriminatory. To be objectively
justified, an action or rule must be a 'proportionate means' of
achieving a 'legitimate aim'. Factors an employer should take
into account when deciding whether a practice or rule can be
objectively justified may include:
- Economic factors (such as business needs and efficiency);
- The health, welfare and safety of an employee (including the
protection of young people and older workers); and
- The training requirements of the job.
Pension Scheme Members
The Equality Act came into force on 1 October 2010. Prior
regulations were in force from 1 December 2006. The law
covers occupational pension schemes and employer contributions to
personal pension plans. It does not impact on the state
pension, National Insurance rebates into contracted out schemes,
pension sharing on divorce or annuities purchased from insurance
companies.
It is unlawful for trustees of occupational pension schemes and
employers contributing to personal pension plans to discriminate
against scheme members and potential scheme members, on the basis
of age. Unless there is a specific exemption, age
discrimination will only be lawful if it can be objectively
justified.
Typically, there are a number of age-related provisions within
occupational pension schemes. For example, some schemes have
different contribution levels and different entry and retirement
ages. The regulations force trustees to treat members the
same irrespective of age for some provisions but have exemptions
for others.
The following is a list of age-related provisions that remain
permissible for both occupational pension schemes and personal
pension plans:
Occupational Pension Schemes
- Minimum and maximum ages for admission to a scheme.
- Minimum level of pay for admission to a scheme or for treatment
as pensionable pay (provided the minimum level is no more than the
lower earnings limit).
- Age criteria in actuarial calculations (e.g. actuarial
adjustments to take account of early and late retirement).
- Pay-related contribution rates and benefits (despite any
potential inequality that might occur due to the fact that older
workers tend to earn more).
- Age-related contributions to money purchase schemes (provided
the aim is to provide more equal emerging benefits than would
result from equal contributions for all ages).
- Equal rates of contributions to money purchase schemes,
irrespective of age (despite any inequality in the emerging
benefits).
- Age-related contributions to final salary schemes (provided the
aim is to meet the cost of benefits provided).
- Minimum age for entitlement to receive benefits.
- Paying benefits without actuarial reduction, or enhancing
benefits (for example by the award of additional pensionable
service), on early retirement (as long as the right existed for
members and prospective members on 01/12/2006).
- Award of additional pensionable service to members retiring
early on the grounds of ill health.
- Bridging pensions for men (and women with a state retirement
age above 60) between 60 and 65.
- Reduction in a spouse's pension on the basis of the difference
in age between the member and the spouse.
- Calculating defined benefits on the basis of pensionable
service (even though older workers will usually have completed
longer service).
- Upper limit on pay or length of pensionable service used to
calculate benefits.
- Minimum pensionable service requirement for eligibility to
certain benefits (provided the minimum service is no more than two
years).
- Closure of scheme (or section of scheme) to new members (even
though this will be detrimental to new joiners, who tend to be
younger).
- Payment of pension increases only to pensioners aged 55 or
over.
- Age-related or service-related pension increases (provided the
aim is to maintain the value of older members' pensions).
- Upper age limit for payment of transfers in or out (provided it
is not more than one year before the scheme's normal retirement
age).
Personal Pension Plans (including Stakeholder Schemes)
- Age-related contributions (provided the aim is to yield equal
emerging benefits).
- Pay-related contributions (despite any potential inequality
that might occur due to the fact that older workers tend to earn
more).
Q & A's
Generally they cannot do this unless the retirement can be
'objectively justified' (see above).
But, if you reached 65 before 1 October 2011, then your employer
can do this as long as 65 was the employer's selected retirement
age for its employees, and your employer gave you six months'
notice of the retirement. You can apply to work beyond 65 if
you don't want to leave at that age. Your employer must
consider your application but is not obliged to allow you to
continue working for them.
If your employer gave you notice between 31 March and 6 April
2011 that you were being compulsorily retired, then you may be able
to claim compensation - for more information, click here.
Pension schemes can continue to use an age below 65 for the date
when pension benefits normally become payable. However, an employer
will need to be able to objectively justify retiring a worker at
any age.
Age related contributions are permissible but only if the aim is
to produce an equal pension for members at different ages.
Schemes are permitted to set a minimum, and/or maximum age
for admission to their pension scheme.
Employers are permitted to set a minimum age after which they
will start to pay contributions to a GPP, but entry to a GPP cannot
be restricted by a minimum age.
Schemes can set an age from which retirement benefits can be
paid without reduction, as long as benefits paid out under that age
are reduced actuarially.
Under the Equality Act, having an age at which members have a
right to draw retirement benefits can continue, including setting
different ages for different categories of members.
This could be ok if benefits are reduced for early
retirement.
