Bringing age laws to book

Borders has changed its defined contribution pension scheme to avoid falling foul of incoming age discrimination laws.

The book retailer switched pension providers to enable it to offer a scheme where employer contribution levels were based on employees’ position in the company rather than on their age.

Anna Lloyd, regional HR manager, said that it discovered the potential problem during a review of the company’s benefits and employment policies.

"Most of our benefits didn’t discriminate [against older workers]. We found the existing pension did because it was a tiered scheme so staff got more money if they were in the mature category."

Lloyd added it was important for the firm to identify such issues well before the legislation comes into effect on 1 October 2006. "We wanted to be proactive. Not only because the legislation is coming in but because we have a very diverse workforce." All Borders employees are eligible for employer contributions as soon as they join the firm and it has also introduced a benefits calculator to help staff work out the value of their benefits package.

Experts have suggested that, while pensions are technically exempt from age laws, some aspects of scheme design could still potentially render them open to discrimination claims. Schemes that do not permit staff over the age of 60 to continue to accrue a pension, for example, could fall into this category if employers do not offer employees that continue working past this age alternative compensation to pension contributions. Schemes that impose a minimum age limit could experience the same problem.

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Tom McPhail, head of pensions research at IFA firm Hargreaves Lansdown, said that with consultation of age discrimination laws still ongoing, however, this could change particularly in terms of a statutory retirement age. "We do not have the full legal picture yet so that may move between now and October 2006."

Angus Jones, managing director of IFA firm Clarity, said that employers would be wise to look at the issue early so that any changes could be incorporated into preparing pension schemes for simplification in April next year.