Tapered compensation payment near retirement age was not unlawful age discrimination

Background

In Mr L (CAS-14918-Y8J9), Mr L, a former civil servant, made a complaint to the Pensions Ombudsman concerned the calculation of compensation payable under the Civil Service Compensation Scheme (CSCS) following the complainant's dismissal from employment with the Department for Work and Pensions on grounds of ill health.

The compensation payable was reduced under a scheme rule which applies where an individual is within three years of normal pension age. The reduction, known as a taper, decreases compensation progressively as an employee approaches retirement age.

The complainant argued that the taper amounted to unlawful age discrimination because older employees received lower compensation payments than younger employees. He also challenged aspects of the way in which his compensation had been calculated.

Determination

The Deputy Pensions Ombudsman rejected the age discrimination complaint.

The Ombudsman accepted that the taper resulted in less favourable treatment because of age. However, age-based treatment can be lawful where it is a proportionate means of achieving a legitimate aim.

Relying on previous authority concerning the same compensation scheme, the Ombudsman concluded that the taper was objectively justified. In particular, it was designed to bridge the gap between dismissal and normal pension age, promote fairness between employees approaching retirement and those already receiving a pension, and avoid abrupt changes in entitlement.

The Ombudsman also rejected the complainant's arguments regarding the calculation of his compensation entitlement. However, maladministration was found in relation to delays and errors in the administration of the claim. The employer had already agreed to make additional payments and pay £1,000 for distress and inconvenience, which the Ombudsman considered to be sufficient redress.

Learning points

This determination is a reminder that age-related provisions are not automatically unlawful. Employers may be able to justify age-based differences in treatment where they pursue a legitimate aim and are proportionate.

The case also highlights the importance of maintaining accurate employment, pension and transfer records. While the age discrimination complaint was unsuccessful, administrative errors and delays still resulted in findings of maladministration and compensation being awarded.

For more information please contact Sharmin Chowdhury in our Employment team.