European ruling could upset pension age plan: Government hopes of equalising retirement at 65 are at risk, Rosie Waterhouse reports

THE Government's plans to equalise the state pension age at 65, forcing women to work for another five years, could be thrown into disarray by a test case in the European Court of Justice.

While ministers are keen to raise the state pension age for women from 60 to 65 to save pounds 4bn a year, the European Court may rule that the age at which occupational pensions must be paid should be equalised at 60.

It is not clear whether such a decision would prevent the Government raising the state pension age to 65 or whether different equalised age entitlements for state and occupational pensions could co-exist.

However, if the European court introduces occupational equality at 60, on the grounds that one sex should not be disadvantaged, this would provide ammunition to those who have lobbied for the state pension age to be reduced for men to 60. If the Government equalises at 65 it could lead to more test cases.

An oral hearing of the European case, involving the now collapsed company Coloroll, took place in January and a preliminary opinion from the Advocate General is expected later this month. The court's ruling, which usually follows the advocate's opinion, is not expected until July.

According to Ann Widdecombe, a social security minister with responsibility for pensions, the Government has not yet decided whether to await the outcome of the Coloroll case before announcing any decision on equalising the state pension age.

Equalising at 65 will be the biggest decision affecting women's lives in decades. Such an unpopular policy change is unlikely to be announced until after the local government elections next month.

Press speculation has heightened that the Government has decided to equalise at 65 but officially, press officers say the options of 60, 63 and a flexible age between 60 and 70 are still being considered. However, a Depart ment of Social Security spokesman admitted yesterday that 65 was the most likely age because of the savings that would be made and because most other European countries were raising their pension ages in order to defuse the 'demographic timebomb'.

Between 1991 and 2030, the population will increase from 56.1 million to 60.3 million. The number of pensioners will increase from 10.4 million to 15.5 million but the working population will fall slightly from 34.4 million to 33.7 million.

This means that if pension ages remain unchanged, the 'support ratio' of those working to those over state pension age will fall from 3.3 in 1991 to 2.2 in 2030. If the state pension age is equalised at 60, the ratio will fall from 3.3 to 1.8 and if equalised at 65 it will fall from 3.3 to 2.7.

The Government says it would cost the Treasury pounds 4bn extra a year if the pension age was equalised at 60. These figures are criticised as gross over-estimates by the TUC which, along with the Equal Opportunities Commission, objects to women being deprived of pension rights for five years.

Ironically, the European Court test case which could scupper part of its pensions policy has been financed by the UK government in order to clarify an earlier ruling, the Barber judgment, in May 1990. This held that occupational pensions were deferred pay and fell within the Treaty of Rome (section 119 which lays down the principle of equal pay for equal work) and so pensions should be equal between men and women. It left unclear the age at which pensions should be equalised.

It is uncertain if the ruling would be effective from the court's decision in 1990 or retrospective to the date of the Treaty of Rome in 1957 or the UK's Sex Discrimination Act in 1975.

A DSS spokesman said: 'After the Barber judgment many companies have made up their minds they are equalising at 65. Other companies have . . . postponed a decision to await the outcome of the Coloroll case.'

Leading article, page 17

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