Government’s age legislation 'lacks joined-up thinking'

2003

Employers have attacked the Government’s proposed age legislation as flawed, lacking in joined-up thinking and a threat to occupational pension schemes.

With the Government's consultation on new age legislation due to end on Monday 20 October, the Employers Forum on Age (EFA) has spoken out about its concerns over the proposals.

Sam Mercer, Director of the EFA, said today that the structure of future age laws is flawed. "A lack of joined-up thinking from the Government has left too many grey areas in the current proposals," she said.

"We are calling on the Government to address these to ensure that possible unintended consequences - such as the closure of occupational pensions schemes and the scrapping of employee benefits packages - are avoided.”

In particular, the EFA urged the Government to realise that many occupational pension schemes are structured around age-related criteria that could fall foul of the current proposals.

Companies could face discrimination claims from employees once the new laws are in force and may seek to protect themselves from risk by shutting schemes, EFA warns - over 90 per cent of EFA members have cited it as an area for concern.

"The consultation proposals suggest that the government has not clearly understood the implications of age legislation on occupational pensions," Sam Mercer said.

"To remove all elements of potential age discrimination from pension schemes would not only present a huge administrative burden but would prove extremely expensive, making many occupational pensions unsustainable and leading to possible closure.

"The consequences of not protecting such pension schemes could be far reaching. For example, employers might be forced to close their surviving direct benefit schemes altogether rather than face the risk of unlimited compensation claims. We want the Government to exempt pensions from the legislation."

Mandatory retirement ages are another area of concern. Employers believe that the new laws will mark the end of mandatory retirement ages and do not view a default age as a viable option in the long-term.

Three-quarters of EFA members are worried about retirement and only 4 per cent now plan to develop a policy based on a fixed retirement age.

"Employers have legitimate fears over the difficulty of performance management and the potential development of a 'pay off' culture,” Sam Mercer said. “There is concern that the Government is transferring the risk and responsibility of an ageing workforce onto employers."

She added that the Government should make length of service as a way of calculating benefits exempt from legislation to protect existing employee benefit packages.

Under the current proposals, many current employment policies that contain some length of service elements could be classed as indirect discrimination.

"If employers are forced to demonstrate that each individual policy is both ‘appropriate and necessary’ and each policy can be challenged, they may simply remove the benefit because they cannot afford to level up benefits for all," she said.

"Unless the Government takes action to protect length of service criteria, many benefits currently enjoyed by employees could be under threat."