The new anti-ageism rules
As far as pension schemes are concerned though, ageism is what they’re all about really. I mean they are ageist. That’s the point of them isn’t it?
Anyway, notwithstanding that little fact, it looks like these new regulations will have a big effect on our pension environment and, particularly, what employers will and won’t be able to do after October 2006. You won’t be surprised to know, though, that the actual regulations won’t be published until later this year, so we don’t know all the details yet, but it’s another thing employers will have to take into account when they’re putting all the other pension stuff in place I guess.
The European Framework Directive for Equal Treatment in Employment and Education is the piece of legislation we’ve got to work into our statute books, and the bad news is there is no exemption made for pensions. It is likely that the way pension schemes operate will need to be looked at carefully to make sure that discrimination on grounds of age is not likely to happen. This could call into question all sorts of commonplace practices such as employers giving age-related contributions and things like that. The Directive does make some practical concessions for pension schemes in that it will allow them to have age limits for joining and becoming entitled to benefits and actuarial factors will still be allowed to be age-based for instance.
Remember that at the moment you can’t get to retirement age and start drawing your pension and stay working for the same employer. Now, a lot of this has already been woven into the provisions of the 2004 Finance Act.
But recently the Government got off the fence on one big issue and announced that it will be OK to set a ‘default’ retirement age of 65 for all. Effectively it means that no one will be able to be forced to stop work before they’re 65 (unless of course their employer can objectively justify a lower age but I won’t go there at the moment). This isn’t really a pension issue. Even when the new default retirement age is in place, employees will still be able to say they’re not going along with it and just carry on working. That, obviously, will become a pension issue in its own right and employers will need to decide what they are going to do as far as pension benefits go if people want to work on.
The new post A-Day tax rules will mean that people will be able to take their retirement benefits and carry on working, but the problem for employers will be to see how they can incorporate all the options that people might want in terms of flexibility, without being ageist or sexist while they’re going about it. It’s a tricky one.
At this stage it’s not clear whether the Government’s decision to set a default retirement age of 65 will be allowed to stand, any more than it is clear that they will be able to keep insisting that people should annuitise their pension savings once they reach the arbitrary age of 75. I still think it’s all up for grabs and the next eighteen months or so are going to be pretty interesting in this respect. It’s not going to be boring, put it that way.
25 January 2005
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