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Employers may treat groups of employees differently in relation to their pension benefits, provided that the treatment is not unlawful due to discrimination. Pension schemes are subject to a non-discrimination rule, and trustees have specific duties in this area. Here we look at common areas where discrimination claims may arise.

Key terms:

Direct discrimination occurs when person A treats person B less favourably than A treats or would treat others, because of B’s protected characteristic.

Indirect discrimination occurs when an apparently neutral provision, criterion or practice applies to all relevant individuals, but disadvantages members with a protected characteristic compared to others – unless objective justification can be established.

Objective justification for potentially discriminatory treatment can be shown by evidence that the provision, criterion or practice in question is a proportionate means of achieving a legitimate aim.

Protected characteristics under the Equality Act are: age; disability; gender reassignment; marriage and civil partnership; pregnancy and maternity; race; religion or belief; sex; and sexual orientation.

How discrimination law works

The Equality Act 2010 provides protection against direct and indirect discrimination in relation to the ‘protected characteristics’.

A non-discrimination rule is written into pension schemes by the Equality Act, which in effect means that discriminatory benefits that are not permitted and cannot be justified are to be levelled up in line with the advantaged members.

Some common scheme practices are specifically authorised in legislation, but if you identify a potentially discriminatory provision or practice that is not covered by one of these exemptions, you will need to consider whether it can be objectively justified and, if not, how it can be changed to remove the discrimination.

The general rule is that direct discrimination cannot be objectively justified (except in relation to age), but indirect discrimination may be capable of objective justification.

Common discrimination issues

Sex discrimination

The main sex discrimination issue in the pensions field is that pension schemes used to provide for different normal retirement ages for men and women, reflecting the different ages at which state pension benefits became payable (65 and 60, respectively). On 17 May 1990, the European Court of Justice in Barber decided that this breached the principle of equal pay for men and women and from that date pension rights were ‘levelled-up’ so that the disadvantaged members were entitled to the more favourable treatment (generally the male members were entitled to a lower retirement age from the date of the Barber decision until the scheme amended its rules).

Equalisation still gives rise to issues and litigation, for example where the steps taken at the time were insufficient or incorrectly implemented. Recently, the Court of Appeal ruled in the Safeway litigation that the introduction of the non-discrimination rule in the Pensions Act 1995 (now replaced by the Equality Act) had the effect of closing the Barber window.

In October 2018, the High Court ruled that there is an obligation to equalise for the unequal effect of guaranteed minimum pensions between men and women. The judgment includes guidance on various methods to achieve this. To read more about equalisation issues and the latest case law, visit

There are some exceptions to the principle of non-discrimination in this area – for example, occupational pension schemes can use gender-specific actuarial factors in some contexts, even though insurers are required to use gender-neutral factors in relation to annuity purchases.

Age discrimination

Pension schemes inevitably involve unequal treatment based on age but there is a range of exempt practices under the Equality Act, meaning that most common pension scheme age-related practices are not unlawful. For example, the following are all exempt practices: setting maximum and minimum ages for admission to membership; imposing a maximum length of pensionable service; or setting different age-banded contribution levels for money purchase schemes (where the aim is to equalise the resultant benefit for comparable members).

However, schemes still operate some age related practices or rules that are not covered by a specific exemption. For example, some schemes provide an unreduced early pension after x years of service. This practice may be lawful if it can be objectively justified, for example, as a tool to retain experienced staff and reward long service.

When to be conscious of potential issues

It is worth being conscious of whether any proposed changes to pension benefits are potentially discriminatory on age grounds, and considering whether to take legal advice to ensure that the objective justification for such changes is robust. Common areas of change where age discrimination may arise include: restructuring benefits (such as closure to future accrual or adding a new or different benefit structure); introducing or amending a flexible retirement policy; and amending a redundancy policy.

In 2018, the Court of Appeal unanimously ruled that the manner in which transitional provisions for the Judicial Pension Scheme and the Firefighters’ Pension Scheme had been implemented had given rise to unlawful direct age discrimination (the McCloud and Sargeant cases). Certain members had received full or tapered protection in relation to the changes, depending on how close they were to retirement age. The government has consulted on related changes to numerous public service pension schemes.


What is a disability?

The Equality Act defines a person as having a disability if they have a physical or mental impairment which has a substantial and long-term adverse effect on their ability to carry out normal daily activities. This could include sensory impairments such as problems with hearing and sight, epilepsy, diabetes, mental health problems, dyslexia and learning disabilities. Progressive conditions such as cancer, HIV or multiple sclerosis are now automatically treated as disabilities from the point of diagnosis rather than at the point of impaired ability.

Discrimination arising from disability

In addition to direct and indirect discrimination, schemes should be aware of a third category, ‘discrimination arising from disability’. This applies where there has been unfavourable treatment because of something arising in consequence of the complainant’s disability. It can be easier for a member to establish that this type of discrimination has occurred. In 2018, the Supreme Court ruled that calculating an enhancement to an ill-health pension on the basis of a salary derived from reduced hours was not unfavourable treatment arising in consequence of a disability (click here to read more).

Duty to make reasonable adjustments

Trustees have a duty to make reasonable adjustments for a disabled person where a provision, criterion or practice puts a disabled person at a substantial disadvantage compared to a non-disabled person. Trustees should ensure that they receive information from the employer about members who require special assistance and review processes and practices to make appropriate adjustments accordingly. Examples of reasonable adjustments include: offering signing facilities for deaf members at group presentations; and producing scheme information and communications in a format which is user friendly for disabled members (eg a Braille version for blind members).

Sexual orientation discrimination

Discrimination on the grounds of sexual orientation is unlawful and can only be objectively justified if the discrimination is indirect. Until recently, an exception in the Equality Act meant that a pension scheme only needed to provide equal benefits to same sex spouses and surviving civil partners in relation to pension rights earned from 5 December 2005 (the date section 1 of the Civil Partnership Act 2004 came into force).

However, in 2017, the Supreme Court ruled in Walker v Innospec that same-sex spouses and civil partners should be given the same pension rights as opposite-sex spouses. The Court held that the exception in the Equality Act is contrary to EU law and therefore invalid. As a result, trustees should:

  1. provide full benefits for civil partners and same-sex spouses in respect of all of a member’s pensionable service to the extent necessary to comply with legal requirements (this may require an amendment to the scheme rules); and
  2. work with administrators to revisit and equalise any same-sex spouses’/civil partners’ pensions that have been paid on an unequal basis since 5 December 2005.

The government has not yet amended the Equality Act to reflect the decision. In autumn 2020, it confirmed that it would do so ‘as soon as a suitable opportunity arises’.

Religion or belief discrimination

Discrimination on the grounds of religion or belief is unlawful and can only be objectively justified if the discrimination is indirect. Issues are less likely to arise in this area in the context of pensions. However, failure to provide investment choices in a defined contribution scheme which meet certain religious requirements (eg funds which conform to Sharia law) could prevent certain employees from joining the scheme on religious grounds. This could constitute indirect discrimination unless the practice could be objectively justified. It may be relatively straightforward to offer investment choices which meet religious requirements, in which case it would be hard to justify not doing so.

Avoiding a discrimination claim

High quality evidence is required to support a justification defence

It is worth auditing your pension scheme’s rules, practices and processes against current law (and then on an ongoing basis where there are changes to the law or to scheme practices) to pick up potential risk issues. This could be added as a regular review item on the scheme risk register.

The key issue in discrimination claims is often whether the difference in treatment can be objectively justified. Case law highlights the importance of:

  1. Meeting the justification test: to do this, you need to establish a ‘legitimate aim’ and show why the difference in treatment is a proportionate way of achieving that aim. Always consider whether there is a less discriminatory way of reaching the same objective. Cost factors may be relevant, but are not generally sufficient justification on their own. The Court of Appeal has recently concluded that an employer’s need to reduce expenditure, and specifically staffing costs, can constitute a legitimate aim as part of objective justification of indirect discrimination (read more here).
  2. Retaining records: keep a record of the reasons behind the introduction of the difference in treatment; any supporting evidence, such as financial or operational information; and, if the practice is reconsidered at any time, the reasons for retaining the practice. 

The lack of supporting evidence for justification was a central issue in the McCloud/Sargeant decision mentioned above (where there was a finding of unlawful age discrimination).

Review scheme rules and practices

You should keep the scheme rules and the day-to-day practice administration of the scheme under review to ensure that no unlawfully discriminatory practices exist or develop. Remember that trustees are responsible for the acts of their administrators, so this is also relevant when monitoring and reviewing administrator performance.

Members may bring a claim to the Pensions Ombudsman

Most discrimination claims are employer/employee disputes, and the time limits for bringing a claim to an Employment Tribunal are much shorter than those for bringing a claim to the Pension Ombudsman (TPO). An individual can often use the same facts to bring a TPO complaint against trustees and/or an employer. Although recent complaints to TPO involving discrimination allegations have not succeeded, trustees and administrators will still bear the time and cost of responding to the complaint under the internal dispute resolution procedure (IDRP), and any TPO investigation.

To read more about IDRP, visit

To read more about TPO, visit

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