Age discrimination arises as a result of unfair pension schemes

In the Employment Tribunal case of McCloud v MOJ, UK legislation setting down conditions for benefits under public sector pension schemes has been found to be in breach of discrimination law.

Age is one of the protected characteristics under the Equality Act 2010, and employers have a duty not to discriminate against any employee because of their age.

210 judges brought indirect discrimination claims against the MOJ based on the transitional provisions in the Judicial Pensions Regulations 2016. Under these regulations, serving judges were compulsorily transferred into a new judicial pension scheme which provided less valuable retirement benefits. The transitional arrangements in place under the regulations permitted older judges to remain members of the more favourable old judicial pension scheme, either until retirement or until the end of a period of tapered protection- dependent on age. Roughly 85% of serving judges were initially protected under the transitional provisions with most suffering only minor adverse effects from the changes. Younger unprotected judges, however, were denied this protection and were exposed to a severe adverse impact, namely needing to make an average annual investment of £30,000 to replace their lost pension value. They argued that they were, therefore, being treated less favourably.

Less favourable treatment can be justified under the Equal Treatment Framework Directive as a proportionate means of achieving a legitimate aim. The MOJ conceded that the transitional provisions amounted to less favourable treatment, but attempted to argue that this could be objectively justified.

The MOJ stated that the legitimate aim was to protect judges closest to retirement from the financial effects of pension reform. However, the MOJ could not provide any evidence of disadvantage suffered by this group. Unsurprisingly the employment tribunal held that these “transitional protections” were not reasonably necessary means to achieve such an aim because they went beyond what was necessary either to achieve consistency, or to protect those judges nearer to retirement and were not proportionate.

Employers should note that where changes to pension schemes are proposed, transitional arrangements may need to be offered to all employees. Employers must ensure that they can justify any different arrangements on the grounds that they are a proportionate means of achieving a legitimate aim, any arguments put forward will need to be supported by robust evidence.

The MOJ has lodged an appeal with the Employment Appeals Tribunal against this decision stating that state that the tribunal ‘erred’ in its approach to the issues which it determined, and did not address all of the issues before it. We will keep you updated on developments.