January 16, 2019

Changes to judges’ and firefighters’ pension schemes found to be discriminatory

Government pension reforms affecting judges and firefighters were ruled discriminatory in a judgment made on 20 December 2018 by the Court of Appeal.

Background

Two sets of claimants, one firefighters and the other judges, brought unlawful age discrimination claims against the government following changes made to their pension schemes. The two cases, The Lord Chancellor and Secretary of State for Justice and another v McCloud and Mostyn and others and Sargeant v London Fire and Emergency Planning Authority and others were heard together in view of the similarity in their circumstances and earlier contradictory outcomes at the employment tribunal.

The challenge from 210 judges, followed cost-saving reforms across public sector schemes in 2015 which saw changes made to the judges’ pension scheme. The challenge from the Fire Brigade Union was based on similar facts and it involved over 6000 tribunal claims, in which firefighters alleged that the government's decision to force younger firefighters to leave their existing pension scheme and join a less beneficial pension scheme was unlawful.

Broadly speaking, judges and firefighters who were within 10 years of normal pension age on 1 April 2012 were permitted to remain members of their respective existing schemes. Tapered protection of benefits was available for members who were between 10 and 14 years from normal pension age on that date. However, the judges and firefighters who were more than 14 years from normal retirement age on 1 April 2012 had no protection and were transferred straight into new pension schemes.

Both sets of claimants argued that the arrangements were discriminatory on the grounds of age because the younger claimants were being treated less favourably than the older judges and firefighters. Moreover, since the younger members of these pension schemes tended to be more diverse in terms of gender and ethnicity, they also claimed indirect race discrimination and a breach of the principle of equal pay.

Court of Appeal decision

The employment tribunal had previously ruled that the changes to the judges' pension scheme were discriminatory, whereas the firefighters' pension scheme was not found to be discriminatory, and the two cases were combined when the government appealed the judges' ruling. However, both the appeal to the Employment Appeal Tribunal and subsequent appeal to the Court of Appeal were rejected.

The question for the Court of Appeal was whether the employers could show that the age discrimination against the younger members was objectively justified. This required the government to show that there was evidence of a legitimate social policy aim being pursued and evidence that the means chosen to achieve that aim were proportionate.

The Court said that simply asserting a belief that 'it felt right' to protect older workers was not enough to amount to a legitimate aim which could justify discrimination against younger workers. Moral and political aims held to be legitimate had to be supported by evidence - for example, evidence that having less time to prepare for the impact of the changes would create financial difficulties for the older workers. Without this evidence, the Court said that the government discriminated against the two sets of claimants on the grounds of age, race and equal pay in relation to the changes to their pension.

What does this mean?

In these cases it was clear that the age-related transitional arrangements directly discriminated against the younger judges and firefighters because of their age. The question therefore centred around the government's reasoning, because unlike other forms of direct discrimination, direct age discrimination can be objectively justified. Indirect discrimination claims, such as the race and equal pay claims in these cases, are also capable of objective justification. Employers must be prepared to justify – with evidence - any directly age discriminatory provisions, and also any provision, criterion or practice, applied to all members of a pension scheme that puts one set of members at a particular disadvantage due to another protected characteristic, such as gender and race.

These cases are a useful reminder that if an employer is looking to change the pension arrangements of its employees, any difference in treatment based on age will need careful consideration. The rules on age exceptions for pension schemes contain a detailed list of exceptions under which specified practices adopted by occupational pension schemes do not breach discrimination law. However they do not cover all situations and were of no assistance in these cases. If the practice in question does not fall within the scope of the rules, employers will need to show that any different treatment based on age is proportionate, and evidence the legitimacy of their stated aims.

The Lord Chancellor and Secretary of State for Justice and another v McCloud and Mostyn and others

Sargeant v London Fire and Emergency Planning Authority and others

The Equality Act (Age Exceptions for Pension Schemes) Order 2010