UK - Pending European age discrimination legislation could discourage occupational pensions and defined contribution arrangements, Mercer has warned.
The Employment Equality (Age) Regulations, part of a European directive, are due to come into effect in October.
But Mercer Human Resource Consulting has argued that, without revisions, the regulations could discourage companies from setting up such arrangements, because many employers will face extra costs to ensure compliance.
Under the legislation, companies with defined benefit schemes will have to review their arrangements relating to early and late retirement, and revisions might also be needed to any schemes that only let employees join following a waiting period.
Furthermore, Mercer warned that although age-related contributions to DC schemes appeared to be exempt under the regulations, the exemption only applied in limited circumstances.
The guidance provided by the Department of Trade and Industry (DTI) was “not helpful”, the consulting firm complained.
It is now calling for pension schemes to be exempt from the regulations.
Deborah Cooper, principal at Mercer, said helping employees to defer their pay for retirement income should not be constrained by regulations intended to provide equal treatment for people of working age.
Cooper pointed out that pension schemes, by their nature, discriminate between people who are young enough to work and those who are not.
“The government has chosen to implement the European Directive by exempting certain pension scheme practices in a selective and obscure way,” she commented.
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