For most areas the age discrimination regulations come into effect on Sunday, however pensions, being the special area it is, has got a small reprieve.
Instead there is a two month gap, which according to the Department for Work and Pensions (DWP), is to give employers and trustees extra time to get ready for the legislation and to raise any additional issues.
So the industry now has until the 1 December, but anybody waiting patiently for the next consultation paper to come out on this issue, will be in for a disappointment as it is going to be “an informal consultation period”, which means no lengthy papers to trawl through and respond to.
So some good news then!
However now there is the two month breathing space, what can it be used for? Well many in the industry just want some clarity on the regulations, as although pensions is exempt in many cases there is a lot of contradictory bits and pieces.
For example an occupational defined contribution (DC) scheme where the employer pays 5% to all employees regardless of age will be exempt from the regulations, however a DC Group Personal Pension (GPP), again paying 5% contribution across the board, is not exempt.
In addition the legislation is still a bit iffy about the ability to tier contributions, with the government saying offering different contributions between those over and under say 40 will definitely not be allowed, while a three tier system still likely to be considered discriminatory, but a 10 tier system which an actuary has looked at and decided is fair might be allowed.
Still with me?
So for GPPs in particular I’m not sure what the government expects them to do if they can’t pay everybody the same contributions, and can’t have a tiered system without actuarial guidance and a lot of complex calculations.
And some members of the industry suggest the default age of 65, which is scheduled for review in 2011, could lead to most employers refusing to employ people after that age because of the costs involved.
Andrew Tully, marketing technical manger at Standard Life, points out, if a worker was still employed past the age of 65 and the employer offered added benefits such as life assurance, they would still have to offer this to the older workers or be accused of age discrimination.
And he warns it will be very difficult for employers to find an insurer willing to take that risk, maybe not at 65, but by the time the worker reaches 67 or 68, the cost would give employers serious problems.
The only possible solutions therefore would be to either cut the benefits for everyone, or simply not employ someone past the age of 65, which under the current legislation employers would be entitled to do.
However, Age Concern, supported by the trade unions, are applying for a judicial review, arguing the European Union (EU) has not set any kind of default age in its legislation, this is something which has come from the UK government and as such is not in keeping with the aim of the regulations.
But the chances of this case being resolved in the next two months are pretty slim, and while most of us would think the government would be better off delaying the legislation and going back to the drawing board on the pension related aspects – this is not going to happen.
The deadline set out by the EU for implementation of the age discrimination legislation is 2 December, the day after the pensions related regulations are scheduled to come into effect.
So with the chances of the government going against the EU and delaying the legislation until next year extremely unlikely, it seems the pensions industry has its work cut out to try and make sense of the contradictory draft regulations which are currently proposed.
Not that I want to plunge anybody into the pit of despair or anything, but this gives the industry and government just 46 (working) days to make any necessary changes, so you may want to start preparing yourself for the mass of new/amended or even unchanged regulations which are likely to land on your desk at the end of November.
There’s nothing like leaving things to the last minute, is there? But I wonder if a successful implementation would merit an entry into the Guinness Book of World Records? Maybe its something the government could look into.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
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First mentioned in Cridland Report
Second acquisition of 2019