Age discrimination is a notoriously difficult area to address in the context of pension plans (which, by their very nature, provide benefits by reference to the age of an individual). Two recent UK employment tribunal decisions have put age discrimination into the spotlight – with very different outcomes.
Claim by members of the judicial pension scheme
(McCloud and others v Lord Chancellor and Secretary of State for Justice and another)
In 2015, the government replaced the existing judicial pension scheme with a new pension arrangement, providing significantly less generous benefits. To soften the blow of the changes, it was proposed that judges less than 7 years from retirement would be permitted to remain in the existing scheme until retirement. There would also be tapered relief for other judges falling just outside this age bracket, whose transfer to the new arrangement would be delayed by a certain period depending on their age. The remaining (mostly younger) judges would move to the new arrangement straightaway.
Over 200 judges complained that the proposals were age discriminatory. They also claimed that the transitional measures were indirectly discriminatory on grounds of sex and race and contrary to the principle of equal pay (due to the gender and racial profile of the protected and unprotected groups).
Employment policies that are age discriminatory are not necessarily unlawful, and it therefore fell on the government to establish that the beneficial treatment of older judges was objectively justifiable, in other words, it was a proportionate means of achieving a legitimate aim.
The government argued that the principal reason behind the difference in treatment was to protect those members who were closest to retirement from the changes, as they would have less time to prepare for the expected shortfall in retirement income resulting from the switch to the new arrangement. However, the tribunal did not agree that the transitional measures were a proportionate means of achieving a legitimate aim. This was for a number of reasons, but most importantly the tribunal noted that the real effect of the measures was to protect those who were least in need of protecting (as the closer a member was to retirement, the less affected by the changes he or she would be).
Claim by members of the firefighters’ pension scheme
(Sargeant and others v London Fire and Emergency Planning Authority and others)
A similar claim by members of a firefighters’ pension scheme has also been considered by an employment tribunal, but with a very different result.
The government made similar changes to the firefighters’ pension scheme to those made to the judicial pension scheme, and offered similar transitional protections for those close to retirement. A group of firefighters challenged the protections given to their older colleagues by bringing age discrimination, sex discrimination, race discrimination and equal pay claims.
On this occasion, the tribunal deliberately disregarded the earlier decision concerning the judicial pension scheme and accepted the government’s argument that the beneficial treatment of older firefighters was a proportionate means of achieving a legitimate aim. In reaching this decision the tribunal considered that the government introduced the transitional measures having made a social policy decision to protect those close to retirement, and that the government has a wide discretion in social policy matters.
Lessons for employers
It is important to note that neither of these claims were an attempt to challenge the replacement of a pension plan with a new, less generous arrangement. Instead, the claims concerned the preferential treatment that was provided to older pension plan members.
The decisions relate to public sector pension plans and arguments regarding social policy matters are obviously not available to private sector employers. However, these decisions are a useful reminder that, if you want to be able to successfully defend an age discrimination claim using an objective justification defence, then you must be able to provide adequate evidence that your intended objective is a legitimate aim, and that the measures taken to achieve it are proportionate.
We understand that appeals against both decisions are being pursued (it has recently been reported that the appeals may be heard together) and that a similar claim in relation to the police pension scheme is pending, so expect further developments in this area…