UK: Pension Reform And Age Discrimination

Last Updated: 6 February 2019
Article by Virginia K. Allen, Sarah Beeby, Ryan Carthew, Mark Hamilton and Jessica Pattinson

The Court of Appeal found that the transitional provisions in two public sector pensions schemes, designed to protect older workers, unlawfully discriminated against younger workers on the grounds of age.These cases (which were conjoined) the Westminster Government lost its argument that the difference in treatment was justified. It would be surprising if the Government did not appeal at least some of the Court's decisions to the UK Supreme Court, given the cost of not doing so. The Lord Chancellor and Ministry of Justice and another v McCloud and Mostyn and others; The Secretary of State and others v Sargeant and others (20 December 2018).


Subject to any such appeal, these combined decisions find transitional protections in the judges' and firefighters' pension schemes unlawful.

The judges were members of the Judicial Pension Scheme ('JPS') until it closed on 31 March 2015. After that date, judges would accrue benefits in the New Judicial Pension Scheme ('NJPS'). It was not disputed that NJPS benefit accruals would be of considerably less value than membership of the JPS, both in terms of a reduced benefits and tax treatment. Transitional provisions were put in place, offering full, tapered or transitional protection depending on age. Judges born before 1957 were afforded full protection (remained entitled to membership of the JPS), judges born between 1957 and 1960 were given tapered protection and those born after 1960 were given no protection. A group of judges claimed they were directly discriminated against on the grounds of age.

Similarly the firefighters were members of the Firefighters Pension Scheme ('FPS') until 31 March 2015, and after that date would accrue benefits in the New Firefighters Pension Scheme ('NFPS'). As with the NJPS, the terms of the NFPS were materially less favourable than the FPS. Similar full, tapered, transitional or no protection was offered, depending on the age of the firefighters, with a view to protecting those closest to retirement age. A group of firefighters claimed they were directly discriminated against on the grounds of age.

Both groups also claimed equal pay and indirect race discrimination. In particular, in the judicial system, female judges and ethnically diverse judges tend to be younger, and so claimed that they were more likely to be affected by these changes.

Age discrimination

The Equality Act defines unlawful discrimination as treating one person less favourably than another because of a protected characteristic. Differences of treatment on grounds of age will not constitute discrimination if the discriminator can objectively justify it; as being an appropriate means of achieving that legitimate aim, and reasonably necessary to accomplish it.

In both cases it was conceded that the younger workers had been directly discriminated against by reason of age but it was asserted that this was justified as a proportionate means of achieving a legitimate aim.

The judges case

The Government had argued that for the judges the stated aim was to protect those closest to retirement from the financial effects of pension reform or, put another way, a 'moral and political' aim of being fair to those closest to retirement who would have less time to prepare for the impact of pension reform than those further away from retirement.

The Court of Appeal had agreed with the Employment Tribunal's judgement that the real reason the Government had incorporated transitional provisions was a desire for consistency: similar provisions had been agreed with trade unions for other public sector workforces. However, consistency requires like cases to be treated alike and, in the case of the judges, the position was different as, the older the judges were, the less adversely they were affected by the reforms. There was no rational explanation put forward to justify consciously treating a group, who were the least adversely affected, more favourably.Had there had been a legitimate aim, it would be necessary to go on to consider proportionality. The Court of Appeal found that the transitional provisions went beyond what was necessary either to achieve consistency or to protect those closest to retirement. It stated that the desire to protect older judges was "irrational" and that there was an absence of evidence supporting this aim. It therefore follows that there was no basis on which this aim could be found to be legitimate.

The firefighters case

In the case of the firefighters the Employment Tribunal ('ET') found that the full protection provisions were lawful because they were in pursuit of legitimate aims and were using proportionate means. These aims were identified as:

  • to protect those closest to pension age from the effects of pension reform;
  • to take account of the greater legitimate expectation of those closer to retirement that their pension entitlements would not change significantly before retirement;
  • to have a tapering arrangement so as to prevent a cliff edge between fully protected and unprotected groups; and
  • to achieve consistency across the public sector.

It also found that the transitional provisions were both legitimate and proportionate as a line had to be drawn somewhere and that was a social policy choice. The firefighters appealed to the Employment Appeal Tribunal ('EAT'). The EAT upheld the ET's decision on legitimate aims but held it had erred in law in assessing proportionality. Both sides appealed to the Court of Appeal.

The Court of Appeal recognised that where the decision giving rise to the alleged discrimination is made by a government, a tribunal must accord an appropriate margin of discretion to the state, however, it still has to ask whether the aim is legitimate in the particular circumstances of the employment concerned. That is an objective assessment which the ET judge had failed to carry out, in part because there was no evidence led as to the reasons underlying the aims. It therefore allowed the firefighters appeal and upheld their claims that they had been the victims of unlawful discrimination as this was the only conclusion that could be reached in the absence of evidence of legitimacy. Having done so there was no need to consider proportionality.


These particular pension reforms were the result of the government's implementation of the 2011 Hutton Report recommendations. There will be a raft of public sector and quasi public sector schemes affected by this decision, as well as the pension provisions of some public sector service providers. Subject to the outcome of any appeal to the Supreme Court, this is going to be an expensive problem to resolve. Questions arise over younger workers who have suffered discrimination may be entitled to compensation:

  • What changes must now be made to pension schemes to ensure compliance?
  • Might there be actionable liability if employers were required to provide such pension provisions in public sector contracts?

The principles the Court applied here also apply to private sector schemes, so employers should carefully consider whether any compensatory or transitional provisions in a pension review exercise might be unlawful discrimination, not only on the grounds of age, but indirectly on the grounds of sex or race - or give rise to issues of equal pay.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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