DWP launches age discrimination consultation

It comes in response to an earlier DWP consultation, which suggested occupational schemes be allowed to either stop or reduce benefits for workers over the age of 65, or stop death-in-service benefits, to keep costs manageable for employers.

The DWP said its initial consultation found age discrimination laws - which require employers to provide the same benefits to all employees regardless of age - were causing considerable unease among firms, trustees and pension advisers.

Currently, employers are permitted to retire workers at age 65, though they can agree to continue working beyond this age.

However, the government said some employers were facing considerable additional costs when employing older workers.

For example, if a firm had to pay pension contributions, or provide a standard death-in-service benefit, then it would face high costs relative to other workers, due to the age of the employee.

However, Standard Life senior pensions policy manager Andrew Tully said the government is unlikely to be able to circumvent European rules on age discrimination.

"The UK government is suggesting that employers can stop providing pension and death benefits at age 65. But UK legislation is taken directly from a European directive. This means that the European Court could potentially over rule any changes introduced."

Pension schemes already qualify from a number of exemptions to age discrimination rules, including minimum and maximum age of entry to a particular scheme, and maximum length of service calculations.

The government and employers are hoping to use these exemption rules to avoid paying benefits for older workers, but Tully said they are unlikely to succeed.

He added: "Other practices [for exemption] have to be 'objectively justified' by the employer or trustees - the cost of a particular benefit is not an allowable reason for an employer to not provide it.

"For example the cost of providing life cover to employees over 65 is significantly higher than for younger employees, but this reason alone is not sufficient reason for an employer not to provide that benefit to the over 65s."

The consultation closes on March 10, 2009.