UK: Pension Reform And Age Discrimination

Last Updated: 6 February 2019
Article by Virginia K. Allen, Sarah Beeby, Ryan Carthew, Mark Hamilton and Jessica Pattinson

The Court of Appeal found that the transitional provisions in two public sector pensions schemes, designed to protect older workers, unlawfully discriminated against younger workers on the grounds of age.These cases (which were conjoined) the Westminster Government lost its argument that the difference in treatment was justified. It would be surprising if the Government did not appeal at least some of the Court's decisions to the UK Supreme Court, given the cost of not doing so. The Lord Chancellor and Ministry of Justice and another v McCloud and Mostyn and others; The Secretary of State and others v Sargeant and others (20 December 2018).

Background

Subject to any such appeal, these combined decisions find transitional protections in the judges' and firefighters' pension schemes unlawful.

The judges were members of the Judicial Pension Scheme ('JPS') until it closed on 31 March 2015. After that date, judges would accrue benefits in the New Judicial Pension Scheme ('NJPS'). It was not disputed that NJPS benefit accruals would be of considerably less value than membership of the JPS, both in terms of a reduced benefits and tax treatment. Transitional provisions were put in place, offering full, tapered or transitional protection depending on age. Judges born before 1957 were afforded full protection (remained entitled to membership of the JPS), judges born between 1957 and 1960 were given tapered protection and those born after 1960 were given no protection. A group of judges claimed they were directly discriminated against on the grounds of age.

Similarly the firefighters were members of the Firefighters Pension Scheme ('FPS') until 31 March 2015, and after that date would accrue benefits in the New Firefighters Pension Scheme ('NFPS'). As with the NJPS, the terms of the NFPS were materially less favourable than the FPS. Similar full, tapered, transitional or no protection was offered, depending on the age of the firefighters, with a view to protecting those closest to retirement age. A group of firefighters claimed they were directly discriminated against on the grounds of age.

Both groups also claimed equal pay and indirect race discrimination. In particular, in the judicial system, female judges and ethnically diverse judges tend to be younger, and so claimed that they were more likely to be affected by these changes.

Age discrimination

The Equality Act defines unlawful discrimination as treating one person less favourably than another because of a protected characteristic. Differences of treatment on grounds of age will not constitute discrimination if the discriminator can objectively justify it; as being an appropriate means of achieving that legitimate aim, and reasonably necessary to accomplish it.

In both cases it was conceded that the younger workers had been directly discriminated against by reason of age but it was asserted that this was justified as a proportionate means of achieving a legitimate aim.

The judges case

The Government had argued that for the judges the stated aim was to protect those closest to retirement from the financial effects of pension reform or, put another way, a 'moral and political' aim of being fair to those closest to retirement who would have less time to prepare for the impact of pension reform than those further away from retirement.

The Court of Appeal had agreed with the Employment Tribunal's judgement that the real reason the Government had incorporated transitional provisions was a desire for consistency: similar provisions had been agreed with trade unions for other public sector workforces. However, consistency requires like cases to be treated alike and, in the case of the judges, the position was different as, the older the judges were, the less adversely they were affected by the reforms. There was no rational explanation put forward to justify consciously treating a group, who were the least adversely affected, more favourably.Had there had been a legitimate aim, it would be necessary to go on to consider proportionality. The Court of Appeal found that the transitional provisions went beyond what was necessary either to achieve consistency or to protect those closest to retirement. It stated that the desire to protect older judges was "irrational" and that there was an absence of evidence supporting this aim. It therefore follows that there was no basis on which this aim could be found to be legitimate.

The firefighters case

In the case of the firefighters the Employment Tribunal ('ET') found that the full protection provisions were lawful because they were in pursuit of legitimate aims and were using proportionate means. These aims were identified as:

  • to protect those closest to pension age from the effects of pension reform;
  • to take account of the greater legitimate expectation of those closer to retirement that their pension entitlements would not change significantly before retirement;
  • to have a tapering arrangement so as to prevent a cliff edge between fully protected and unprotected groups; and
  • to achieve consistency across the public sector.

It also found that the transitional provisions were both legitimate and proportionate as a line had to be drawn somewhere and that was a social policy choice. The firefighters appealed to the Employment Appeal Tribunal ('EAT'). The EAT upheld the ET's decision on legitimate aims but held it had erred in law in assessing proportionality. Both sides appealed to the Court of Appeal.

The Court of Appeal recognised that where the decision giving rise to the alleged discrimination is made by a government, a tribunal must accord an appropriate margin of discretion to the state, however, it still has to ask whether the aim is legitimate in the particular circumstances of the employment concerned. That is an objective assessment which the ET judge had failed to carry out, in part because there was no evidence led as to the reasons underlying the aims. It therefore allowed the firefighters appeal and upheld their claims that they had been the victims of unlawful discrimination as this was the only conclusion that could be reached in the absence of evidence of legitimacy. Having done so there was no need to consider proportionality.

Comment

These particular pension reforms were the result of the government's implementation of the 2011 Hutton Report recommendations. There will be a raft of public sector and quasi public sector schemes affected by this decision, as well as the pension provisions of some public sector service providers. Subject to the outcome of any appeal to the Supreme Court, this is going to be an expensive problem to resolve. Questions arise over younger workers who have suffered discrimination may be entitled to compensation:

  • What changes must now be made to pension schemes to ensure compliance?
  • Might there be actionable liability if employers were required to provide such pension provisions in public sector contracts?

The principles the Court applied here also apply to private sector schemes, so employers should carefully consider whether any compensatory or transitional provisions in a pension review exercise might be unlawful discrimination, not only on the grounds of age, but indirectly on the grounds of sex or race - or give rise to issues of equal pay.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions