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DB closures could have ageism implications

UK - Fears that UK employers who close final salary schemes could fall foul of the EU’s anti age discrimination directive have led to calls on the UK government for clarification.

Pension consultants say that there is uncertainty about the position of new employees who do not have access to closed final salary schemes. If they are younger than existing members it could provide grounds for a case of age discrimination

Tim Keogh, European partner at Mercer Human Resources Consulting, said: “Once again we may be playing lottery with the European Court of Justice. A case of age discrimination would require that a significant number of new employees are younger than existing employees. By no means would this always be true.”

He called for the UK to give clear guidance to employers and consultants to end “damaging speculation.”

The European directive on equal treatment in employment and occupation is due to be implemented by member states by 1 October 2006.

The UK government has said it intends to make use of the directive’s provisions “that will allow occupational pension schemes to set ages for admission and entitlement to retirement benefits.”

However it has not said whether it considers “tiered” age-related contributions to defined contribution (DC) pension arrangements meet the directive’s requirements.

“The government says it wants occupational schemes to be exempt from the directive yet there is no indication it knows exactly what that means, “ said Keogh. “Until direction is given there will be continue to be wide speculation in this area which does nothing for confidence and sensible planning”

There is also confusion about the impact of the directive on the retirement age, according to new research by Aon Consulting.

The UK government is proposing to make compulsory retirement ages in occupational pension schemes unlawful, although state pension schemes will be exempt. Yet many UK employers are unaware of these proposals. A survey by Aon Consulting showed that more than 33% of UK employers do not expect their employees to work beyond their projected retirement age when the anti age discrimination laws come in. A further 45% forecast that fewer than 10% of their employees will do so.

Simon Martin, head of research at Aon Consulting, commented: “Employers still seem to have their heads in the sand over the impact of proposed anti age discrimination, which would enable employees to work well beyond the current compulsory retirement age.”

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