Pension based on age?

[PhilKSebben]

Hi all,

This has been bugging me. My employers pension contributions are based on age - you get more the older you are. It is not based on duration of employment, just age.

Age is a protected characteristic under the Equality Act 2010, no?

I find it hard to believe my particular employer would make a mistake in this, but then I also struggle to see how it's not discriminatory.

Is this legal then? What makes it so?

Thanks!

[ULA]

In essence yes, age related contributions are ok if in a Court the company could prove it was an “appropriate and necessary” means of achieving a “legitimate aim”. With regard to age differences in pension contributions, the regulations allow such differences in order “to equalise… [or] to make more nearly equal the amount of the... benefit... to which workers of different ages who are otherwise in a comparable situation will become entitled”.

Are the variations in rate dramatic?

There was a case in 2013 (HK Danmark v Experion) where the European Court of Justice (ECJ) ruled that age-related employer contributions to defined contribution pension schemes are lawful and not discriminatory to employees. This was because the reason for paying age-related contributions into the scheme, was for a legitimate aim i.e. to allow older employees to build up retirement savings more quickly, as their retirement was approaching sooner than that of younger employees who in effect, had more time on their side. Also, regard should be had to the fact that the contributions required from younger employees, was lower than those required from older employees.

Since the case was an ECJ one it would be for a UK courts to determine based on the specific circumstances of each case and crucially, the interpretation in assessing whether the employer is doing no more than is reasonably necessary to objectively justify a legitimate aim.