The age old debate: age discrimination in pension reforms

In two recent cases, Sargeant and others v London Fire and Emergency Planning Authority and others and McCloud & others v Ministry of Justice, the EAT considered whether age related transitional provisions in the pension schemes were discriminatory.

In Sargeant,  a new pension scheme had been introduced for firefighters with terms less beneficial than those in the existing scheme. In a bid to reduce the financial impact on those closest to retirement, the government implemented transitional provisions which meant that anyone within 10 years of normal pension age (NPA) would remain in the old, more favourable scheme. Tapering provisions applied to those who were 10-14 years away from NPA, and the younger firefighters, who were more than 14 years away, would transfer straight to the new, less generous scheme.

Age discrimination like this is permitted if the measures are a proportionate means of achieving a legitimate aim, and in the original ruling the ET held that whilst the measures were discriminatory, they were also a proportionate means of achieving the Government’s aim.

The EAT agreed with the ET that the Government had a legitimate aim in introducing the pension reforms behind these changes.

However, the EAT decided that the ET had not properly scrutinised the question of proportionality and allowed the Government a ‘margin of discretion’. Therefore the EAT directed the case back to the ET.

In another recent case, the EAT considered similar transitional provisions which had been included in the Judges Pension Scheme (JPS), under which older judges were allowed to remain in the JPS until retirement or until the end of a transitional period, depending on their age.

Again, the government accepted that the transitional period was less favourable to younger members but it had failed to convince the ET that this was objectively justifiable to achieve a legitimate aim.

The EAT agreed with the ET’s earlier ruling, holding that the public benefit in applying government policy consistently across the public sector could not justify the “extremely severe” discriminatory impact on the younger judges, and therefore again, the provisions were not a proportionate way of achieving the aim.

The Government is expected to appeal both of these cases.

The case is a useful reminder that, if implementing changes that treat some members less favourably than others because of age, it is always important to ensure:

• there is a robust, well reasoned and rational aim for treating members differently
• the aim is supported by evidence

It is vital that employers scrutinise the question of proportionality even if they consider that they are implementing a policy to achieve a legitimate aim.