This week saw key decisions from the Employment Appeal Tribunal on whether transitional provisions which protected older pension scheme members from the impact of a reform of their pension schemes amounted to age discrimination.

Background

This case stemmed from the reform of two public service pension schemes in place for firefighters and (separately) the judiciary, and transitional provisions that were applied to certain members of the existing schemes to cushion the impact of the move to less generous pension provision.

These provisions were set primarily according to the members' date of birth, resulting in a category of older scheme members who had full protection (i.e. so could stay in their existing more generous pension arrangement), a category of members born within a certain date range receiving 'tapered protection', and a category with a later birth date, who received no protection at all and simply moved to the new less generous pension scheme as a result of the reforms. Both cases also involved claims of equal pay, as well as indirect sex and race discrimination claims.

In the original employment tribunal decisions, the Employment Tribunal considering the transitional pension provisions for judges had concluded that they were age discriminatory, where the Employment Tribunal decision looking at the transitional pension provisions applied to firefighters has concluded they were not. So two contrasting decisions, based on very similar facts.

In order for this practice not to be unlawful direct age discrimination, the employers here needed to show that the transitional provisions were objectively justified – this is a two-limb test, requiring evidence of a legitimate social policy aim being pursued, and evidence that the means chosen to achieve that aim were proportionate.

The original Employment Tribunal finding of age discrimination in the transitional provisions applied to the judges pension scheme members was upheld, despite the Employment Appeal Tribunal disagreeing with the conclusion the Employment Tribunal had reached in finding that there had been no legitimate aim.

In the firefighters decision, the Employment Appeal Tribunal held that the Employment Tribunal had erred in its approach towards proportionality, and the case has been sent back to the tribunal to decide whether the transitional provisions were a proportionate means of achieving a legitimate aim.

Issues highlighted

The rigour of scrutiny that applies towards assessments of proportionality in the UK courts was reiterated in both of these decisions. Indeed, they are a useful reminder that employers who apply potentially age discriminatory practices need to demonstrate that have a legitimate aim for the practice, that the means used to achieve that aim do meet it, and that there are not other less discriminatory ways of doing so.

Recommendations

In a pensions context, the cases also act as reminders that whilst there are statutory exemptions that apply to age-related practices concerning pension schemes, they do not cover all pension-related practices. Here the disparate impact of the transitional provisions on younger members of the public sector schemes was severe. Employers conducting liability management exercises on defined benefit schemes who are considering transitional provisions should consider any such provisions carefully, critically evaluate the reasoning for treating members of certain ages differently, and explore whether there is a less discriminatory measure which would achieve the same aim.

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