Pension Scheme Transitional Provisions Found to Be Age Discriminatory
The Court of Appeal (CA) has held that the introduction of transitional provisions affecting the pensions of judges and firefighters discriminated against younger members of the schemes.
Less Favourable Treatment
Under the Firefighters Pension Scheme 2015 (FPS 2015) and the New Judicial Pensions Scheme (NJPS), the retirement age for firefighters and judges was increased, whilst providing less beneficial accrual rates. This was introduced as part of the Public Sector Pensions Act 2013 in an effort to make the pension schemes more sustainable.
Under transitional provisions, individuals who were within 10 years of normal pension age were permitted to remain members of the old schemes, therefore keeping the more beneficial pension terms. There was also tapered protection for those who were 10-14 years from normal retirement age. Younger judges and firefighters had no transitional protection.
Over 5,000 individuals transferred to the FPS 2015 and NJPS without the benefit of transitional protection. They subsequently brought claims against their employer and the government departments responsible for the changes, arguing that the transitional measures constituted unlawful age discrimination.
It was widely accepted that they were being treated less favourably on the grounds of their age. The key question for the CA was whether that less favourable treatment could be justified.
What Did the Tribunals Say?
At first instance, the Employment Tribunal (ET) in the firefighters case found that although the claimants were treated less favourably because of their age, the arrangements met the government's legitimate aims of protecting those closest to normal pension age and that the transitional provisions were proportionate, taking into consideration workers' legitimate expectation that their pension entitlement would not significantly change when they were so close to retirement and to ensure consistency across the public sector.
The EAT upheld the ET's decision in relation to legitimate aims but held that the transitional provisions were not a proportionate means of achieving them.
In the judges' case, the ET concluded that the claimants were treated less favourably than their comparators due to their age, and that the government had failed to show that this was a proportionate means of achieving a legitimate aim. Therefore the claims of unlawful age discrimination succeeded. The EAT upheld the ET's finding.
The Court of Appeal decision
Following appeals and cross-appeals of the decisions made by the EAT, the CA found that the transitional provisions in both the FPS 2015 and NJPS were directly discriminatory on the grounds of age. The government had failed to adduce sufficient evidence to support the social policy aims it relied on.
Best Practice for Employers
This is a significant decision for all of the parties involved but will also have a wider impact on public sector pensions with similar transitional provisions.
The case shows that any employers operating policies which discriminate on the grounds of age will need to be able to adduce evidence to demonstrate why the aims of the policy are legitimate as well as demonstrating that the means used to implement the aim are proportionate.
The CA did not grant permission to appeal and we will keep you updated if the government applies for permission to appeal directly to the Supreme Court.