Pensions Matters October 2006 - Age Discrimination

From 1 December 2006, the pensions aspects of the Employment Equality (Age) Regulations 2006 come into force. Failure to address age discrimination could result in significant costs for pension schemes. This briefing looks at the key points which need to be addressed.

The Age Regulations

On 1 October, the Employment Equality (Age) Regulations 2006 (the “Age Regulations”) came into force, making it unlawful for employers to discriminate on the basis of age unless objectively justified. The Age Regulations implement the age equality provisions of the EU Employment Framework Directive.

Pension schemes

The Age Regulations will apply to all occupational pension schemes, whether final salary or money purchase, and whether registered or unregistered under pensions tax legislation. The Regulations will also apply to employer contributions to personal pension schemes (including group personal pension plans and most stakeholder schemes), although not to other aspects of such schemes.

Implementation date

In early September, the Department of Work and Pensions (DWP) announced that it had decided to delay implementing the pensions provisions of the Age Regulations from 1 October to 1 December – the final date by which the EU Employment Framework Directive must be implemented. This delay is in response to concerns that various aspects of the pensions provisions are not clear enough. The additional two-month period is to give the DWP time to clarify these aspects, and the DWP has on 11 October issued a consultation document on “limited amendments and clarifications” to the Age Regulations, together with draft amending regulations. The revised legislation is expected to be ready in mid-November.

Key obligations

From 1 December 2006, it will be unlawful for employers and trustees (and managers) to discriminate against any member or prospective member of an occupational pension scheme on the basis of his or her age, unless that discrimination:

• falls within one of the various exemptions in the Age Regulations; or
• can be objectively justified (see below).

The Age Regulations will not, however, affect pension benefits accrued, or discriminatory practices carried out, before 1 December 2006.