Age discrimination delay turmoil

The government’s decision to postpone the section of the age discrimination regulations focused on pensions until 1 December could have an adverse effect on employers which have already altered schemes to comply with the legislation.

The two months’ grace was granted following calls from pensions lawyers and providers who believed that many employers were confused about what was expected of them.

Organisations now have until 1 December to enter into a consultation and voice their concerns about the effects of the new laws. The government, meanwhile, is expected to use the time to produce clearer guidelines, and could amend the existing legislation.

When consultation on the revised rules and guidelines opened at the beginning of this month, the government indicated the issues under review included the rules around group personal pensions, actuarial calculations, and bridging pensions for employees who retire before reaching the state pension age.

However, there are still concerns around the omission of money purchase schemes from the government’s list and industry figures say many employers remain confused over whether contributions based on age will be discriminatory.

Paul Macro, head of defined contribution pensions at Aon Consulting, said: "Over 20 per cent of schemes that will be affected by the new rules have contribution levels which are dependent on age. Although the first draft [of the proposals] attempted to deal with this problem, it was extremely vague."

Many employers, however, have already completed revisions to their schemes. Andrew Dawson, head of sales and marketing at consultancy firm Gissings, said: "This [time frame] does creates a lame duck period, as employers ask ‘shall we make decisions now or shall we wait for them to make even more changes?’ "We are telling clients to make decisions in principle, based on what they know, [but] be prepared to make changes."

Accountancy firm Ernst & Young has already taken action to address two potentially discriminatory issues in its defined contribution pension scheme. Tim Carney, pensions manager, explained: "We welcome the fact that the government has granted employers another consultation period but, having done our analysis, we feel we have already addressed the fundamental issues concerning our scheme.

"Although we are reasonably comfortable with the current position, we will not be complacent and will be keeping a close eye on the situation. If we need to do more we will."

Despite the possibility that the terms of the legislation could change, employers are still advised to make any necessary changes to their schemes.

Jane Samsworth, partner at law firm Lovells, said the postponement is a positive move. "There was stuff in the legislation which would have been unhelpful in terms of pension schemes, especially when we had expected pension schemes to be largely exempt from the legislation."

She added that employers should approach industry bodies to voice their concerns.