DTI advice on pensions 'could lead to staff suing employers'

Click to follow
The Independent Online

The Government's advice on how new age-discrimination laws apply to company pensions could be wrong, leading occupational schemes warned yesterday. The National Association of Pension Funds (NAPF) said guidance issued to employers on how to interpret the rules, which take effect on 1 October, could leave them open to legal action from staff.

Ken MacIntyre, a policy adviser at the NAPF, said: "This advice is only an opinion and that could be tested by litigation."

The main issue at stake is whether employers will be legally obliged to allow pension scheme members to start drawing a pension if they are still working. Many occupational pension schemes set the company's official retirement age at 60, at which stage staff are entitled to claim their pensions. But the new age-discrimination rules will not allow companies to force staff to retire before age 65.

Guidance on the laws published by the Department of Trade and Industry warns companies with pension schemes with a retirement age of 60 that they must allow staff who want to start taking benefits to do so, even if they are still working.

However, several leading pension lawyers have warned that the guidance may be wrong. Faith Dickson, a specialist pensions lawyer at Sackers, said: "The legislation is not as cut and dried as the DTI has suggested."

Mr MacIntyre added: "The new laws provide a series of exceptions, but these are limited and don't cover many of the policies and practices that pension schemes adopt."

Pensions experts are also concerned that the age discrimination rules could hit the sizeable number of pension schemes where employers pay higher contributions to older workers. Up to a fifth of defined contribution schemes, where members' pensions are not guaranteed, operate in this way, according to the employee benefits specialist, Aon Consulting.

Paul Macro, its head of defined contribution, said the legislation was unclear because it appears to outlaw age-related contribution levels other than in certain circumstances.

The dispute is particularly worrying for employers with pension schemes because it leaves them open to legal challenges from staff. The DTI's guidance has no legal standing and employees unhappy with the way their employers have interpreted the age discrimination legislation would be free to take their cases to a tribunal.

A DTI spokesman said last night: "The Government is aware of the issue and is considering what further action, if any, is necessary to clarify the guidance."