Q&As

Can an employer pay its staff different rates of employer pension contributions, increasing with age?

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Published on LexisPSL on 04/10/2017

The following Employment Q&A provides comprehensive and up to date legal information covering:

  • Can an employer pay its staff different rates of employer pension contributions, increasing with age?
  • General rules relating to direct age discrimination
  • Special exceptions relating to pension schemes

General rules relating to direct age discrimination

Under section 13 of the Equality Act 2010 (EqA 2010) a person directly discriminates against another person where:

  1. he treats him less favourably than he treats or would treat others, and

  2. he does so because of a protected characteristic

Where the protected characteristic in issue is age, an employer can defend a claim of direct discrimination if he can show that the treatment is justified as a proportionate means of achieving a legitimate aim.

Under EqA 2010, s 61, a ‘non-discrimination rule’ applies in respect of occupational pension schemes, whereby a responsible person (which can include an employer whose employees are, or may be, members of the scheme) must not, amongst other things, in carrying out his functions in relation to the scheme, discriminate against another person.

Special exceptions relating to pension schemes

There are, however, various exceptions with regard to the non-discrimination rule, set out in the Equality Act (Age Exceptions for Pension Schemes) Order 2010, SI 2010/2133, (as amended) (the Age Exceptions Order), which allow responsible persons (see above) to do certain things in relation to pension schemes without giving rise to a contravention of the EqA 2010.

Some concerns have been expressed by commentators about whether Directive 2000/78/EC, the European Framework Directive sufficiently authorises all the exceptions which have been given by the Age Exceptions Order.

Under the Age Exceptions Order,

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