Citation, commencement and interpretation

1. —(1) These Regulations may be cited as the Employment Equality (Age) (Amendment No.2) Regulations 2006 and shall come into force on 1st December 2006.

(2) In these Regulations—

“the Age Regulations” means the Employment Equality (Age) Regulations 2006( 3 );

“Schedule 2” means Schedule 2 to the Age Regulations.

Amendment of the Age Regulations

2. The Age Regulations are amended in accordance with the provisions of these Regulations.

Amendment of regulation 11 of the Age Regulations

3. In regulation 11 of the Age Regulations (pension schemes)—

(a) in paragraphs (1) and (2), after “the trustees or managers of” insert in each place “, or any employer in relation to,”; and

(b) in paragraph (1) for “service” substitute “pensionable service”.

Interpretation of Schedule 2

4. —(1) In paragraph 1(3) of Schedule 2 (definition of occupational pension scheme), for “paragraphs 12, 13 and 30” substitute “paragraphs 3A, 7(b), 9, 15A, 17 to 21, 23, 24, 25, 25A and 30”.

(2) In paragraph 1(5) of Schedule 2 (interpretation)—

(a) in the definition of “death benefit” for “pension scheme” substitute “scheme”;

(b) in the definition of “dependant” after “means” insert “a widow, widower or surviving civil partner or a”;

(c) for the definition of “early retirement pivot age” substitute—

“ “early retirement pivot age” means, in relation to age related benefit provided under a scheme, an age specified in the scheme rules (or otherwise determined) as the earliest age at which entitlement arises—

but disregarding any special provision as to early payment on grounds of ill health or otherwise;; ” ;

(d) in the definition of “late retirement pivot age” after “scheme rules” insert “(or otherwise determined)”;

(e) in the appropriate alphabetical places insert—

“ “additional state retirement pension” means the additional pension in the Category A retirement pension within the meaning of sections 44 and 45 of the Social Security Contributions and Benefits Act 1992 ( 4 ) ;

“basic state retirement pension” means the basic pension in the Category A retirement pension within the meaning of section 44 of the Social Security Contributions and Benefits Act 1992 ( 5 ) ;

“block transfer” means a transfer in a single transaction or a series of transactions from a scheme of all the sums and assets held for the purposes of, or representing, or derived from—

relating to a period of continuous pensionable service (or pensionable service which is treated as continuous) or one or more of a number of separate periods of such pensionable service which relate to a member and at least one other member;

“contracted-out rights” are such rights, under or derived from an occupational pension scheme or an appropriate personal pension scheme as fall within the following categories—

but not safeguarded rights (within the meaning of section 68A of the Pension Schemes Act 1993 ( 6 ) );

“guaranteed minimum pension” has the meaning given in section 8(2) of the Pension Schemes Act 1993 ( 7 ) ;

“lower earnings limit” means the amount specified for the tax year in question in regulations made under section 5(1)(a)(i) of the Social Security Contributions and Benefits Act 1992 (earnings limits and thresholds for Class 1 contributions) ( 8 ) ;

“protected rights” has the meaning given in section 10 of the Pension Schemes Act 1993 ( 9 ) ;

“redundancy” means being dismissed by reason of redundancy for the purposes of the Employment Rights Act 1996 ( 10 ) ;

“relevant transfer” has the meaning given in—

“section 9(2B) rights” are—

“upper earnings limit” means the amount specified for the tax year in question in regulations made under section 5(1)(a)(iii) of the Social Security Contributions and Benefits Act 1992 (earnings limits and thresholds for Class 1 contributions) ( 14 ) . ” ;

(f) omit the definitions of “employer contribution”, “member contribution” and “pensionable age”.

(3) Omit sub-paragraph (6) of paragraph 1 of Schedule 2.

(4) In sub-paragraph (8) of paragraph 1 of Schedule 2, after “this Schedule” add “and “occupational pension scheme” shall mean an occupational pension scheme within the meaning of either section 1(1) of the Pension Schemes Act 1993( 15 ) or section 150(5) of the Finance Act 2004( 16 )”.

Length of service exemptions for trustees or managers and employers

5. After paragraph 3 of Schedule 2 (exception for rules, practices, actions and decisions relating to occupational pension schemes) insert—

“ Length of service exemptions

3A. —(1) Subject to sub-paragraph (2), nothing in Part 2 or 3 of these Regulations shall render it unlawful for—

(a) any rule, practice, action or decision of the trustees or managers (“A”) of a scheme regarding—

(i) admission to the scheme (“admission terms”); or

(ii) the accrual of, or eligibility for, any benefit under the scheme (“benefit terms”),

where the admission terms or the benefit terms put a member (“B”) of the scheme at a disadvantage when compared with another member (“C”) if and to the extent that the disadvantage suffered by B is because B’s length of service with an employer (“D”) in relation to the scheme is less than that of C;

(b) any rule, practice, action or decision of an employer (“E”) in relation to a scheme regarding the admission terms or benefit terms where it puts a member (“F”) of the scheme at a disadvantage when compared with another member (“G”) if and to the extent that the disadvantage suffered by F is because F’s length of service with E is less than that of G; or

(c) any rule, practice, action or decision of an employer (“H”) regarding payment of contributions in respect of a worker (“I”) to a personal pension scheme or to a money purchase arrangement (“contribution terms”) where it puts I at a disadvantage when compared with another worker (“J”) if and to the extent that the disadvantage suffered by I is because I’s length of service with H is less than that of J.

(2) Where B’s, or as the case may be, F’s or I’s length of service exceeds 5 years and a length of service criterion in the admission terms or as the case may be, the benefit terms or contribution terms puts B or F or I at a disadvantage—

(a) where sub-paragraph (1)(a) applies, A—

(i) must ask D to confirm whether the length of service criterion reasonably appears to D to fulfil a business need of D’s undertaking (for example by encouraging the loyalty or motivation, or rewarding the experience, of some or all of his workers), and

(ii) may rely on D’s confirmation;

(b) for the purposes of paragraph (a)(i), D must—

(i) calculate B’s length of service;

(ii) provide A with details of B’s length of service; and

(iii) respond to A’s request within a reasonable time;

(c) where sub-paragraph (1)(a) or (b) or (c) applies, it must reasonably appear to D or, as the case may be, E or H that the length of service criterion applies in such a way that it fulfils a business need of his undertaking (for example by encouraging the loyalty or motivation, or rewarding the experience, of some or all of his workers).

(3) When calculating B’s or, as the case may be, F’s or I’s length of service D or, as the case may be, E or H shall calculate—

(a) the length of time the member or worker has been working for him doing work which he reasonably considers to be at or above a particular level (assessed by reference to the demands made on the member or worker, for example, in terms of effort, skills and decision making), or

(b) the length of time the member or worker has been working for him in total,

and it is for D or, as the case may be, E or H to decide which of paragraphs (a) or (b) to use.

(4) For the purposes of sub-paragraph (3), D or, as the case may be, E or H shall calculate the length of time a member or worker has been working for him in accordance with paragraphs (4) to (7) of regulation 32 (exception for provision of certain benefits based on length of service) and any reference in those paragraphs to—

(a) “A” shall be read as if it were a reference to “D” or, as the case may be, “E” or “H”; and

(b) “worker” shall, where sub-paragraph (1)(a) or (b) applies, be read as if it were a reference to “member”.

(5) For the purposes of this paragraph, a “member” shall include a “prospective member”. ” .

Unlawfulness of rules, practices, actions or decisions relating to Part 2 or Part 3 of Schedule 2

6. After paragraph 4 of Schedule 2 (exception for rules, practices, actions and decisions relating to contributions by employers to personal pension schemes) insert—

“ Unlawfulness of rules, practices, actions or decisions relating to Part 2 or Part 3 of Schedule 2

4A. —(1) The inclusion of a rule, practice, action or decision in Part 2 of this Schedule (excepted rules, practices, actions and decisions relating to occupational pension schemes) shall not be taken to mean that, but for the exemption in Part 2, the use or maintenance by an employer, trustees or managers of a scheme of the rule, practice, action or decision in relation to the scheme, would be unlawful.

(2) The inclusion of a rule, practice, action or decision in Part 3 of this Schedule (excepted rules, practices, actions and decisions relating to contributions by employers to personal pension schemes) shall not be taken to mean that, but for the exemption in Part 3, the use or maintenance by an employer of the rule, practice, action or decision in relation to the payment of contributions to a personal pension scheme in respect of a worker, would be unlawful. ” .

Lower earnings limit and offsets for state retirement pension

7. —(1) In paragraph 7 of Schedule 2 (admission to schemes), for sub-paragraph (b) substitute—

“ (b) a minimum level of pensionable pay for admission where that minimum—

(i) does not exceed one and a half times the lower earnings limit;

(ii) does not exceed an amount calculated by reference to the lower earnings limit where the aim is more or less to reflect the amount of the basic state retirement pension; or

(iii) does not exceed an amount calculated more or less to reflect the amount of the basic state retirement pension plus the additional state retirement pension; ” .

(2) For paragraph 23 of Schedule 2 (limits on benefits) substitute—

“ 23. When determining a member’s pensionable pay by reference to which any age related benefit or death benefit payable to or in respect of a member is calculated, to exclude from the member’s remuneration an amount which—

(a) does not exceed one and a half times the lower earnings limit;

(b) does not exceed an amount calculated by reference to the lower earnings limit where the aim is more or less to reflect the amount of the basic state retirement pension; or

(c) does not exceed an amount calculated more or less to reflect the amount of the basic state retirement pension plus the additional state retirement pension. ” .

(3) After paragraph 23 of Schedule 2 insert—

“ 23A. Any difference in the amount of age related benefit or death benefit payable under a scheme to or in respect of members where the difference is attributable to accrual of age related benefit at a higher fraction of pensionable pay for pensionable pay over the upper earnings limit (and a lower fraction of pensionable pay for pensionable pay under the upper earnings limit) where the aim is to reflect the additional state retirement pension. ” .

Amendments of paragraphs 8 and 9 of Schedule 2

8. —(1) In paragraph 8 of Schedule 2 (the use of age criteria in actuarial calculations)—

(a) after “The use of age criteria in actuarial calculations” insert “in a scheme”; and

(b) in sub-paragraph (b), after “employer contributions” insert “by or in respect of a member”.

(2) In paragraph 9 of Schedule 2 (contributions)—

(a) after “employer contributions” insert “,to a scheme,”;

(b) after “pensionable pay” insert “or, where paragraph 19A applies, different accrual rates”.

Money purchase arrangements

9. In paragraph 10 of Schedule 2 (contributions under money purchase arrangements)—

(a) in paragraph (i) of sub-paragraph (a), for “amount of benefit” substitute “amount of age related benefit in respect of comparable aggregate periods of pensionable service”;

(b) for paragraph (ii) of sub-paragraph (a) substitute—

“ (ii) to make more nearly equal the amount of the age related benefit, in respect of comparable aggregate periods of pensionable service, to which members of different ages who are otherwise in a comparable situation will become entitled under the arrangement; ” ;

(c) after sub-paragraph (b) add—

“ (c) any limitation on any employer contributions in respect of a member or member contributions by reference to a maximum level of pensionable pay. ” .

Limits on contributions to a defined benefits arrangement

10. After paragraph 11 of Schedule 2 (contributions under defined benefits arrangements) insert—

“ 11A. Any limitation on employer contributions in respect of a member or member contributions to a defined benefit arrangement by reference to a maximum level of pensionable pay. ” .

Early retirement

11. —(1) For paragraph 12 of Schedule 2 (reductions for early retirement) substitute—

“ 12. —(1) Subject to sub-paragraph (4), a minimum age for any member of a scheme to be entitled to a particular age related benefit that is paid in accordance with sub-paragraph (2) and is paid—

(a) either with or without consent (whether of an employer, the trustees or managers of the scheme or otherwise), and

(b) before the early retirement pivot age relevant to that age related benefit.

(2) The age related benefit must—

(a) be actuarially reduced on the basis that the aim is to reflect that it is paid on a date before the applicable early retirement pivot age; and

(b) not be enhanced by crediting the member with any additional periods of pensionable service or additional benefits.

(3) Sub-paragraph (1) shall also apply to different minimum ages for different groups or categories of members.

(4) Sub-paragraph (1) shall not apply to any member who retires on the grounds to which paragraph 13, 13A or 15 apply. ” .

(2) For paragraph 13 of Schedule 2 (enhancements for early retirement) substitute—

“ 13. —(1) A minimum age for any active or prospective members of a scheme for payment of or entitlement to a particular age related benefit before the early retirement pivot age relevant to that age related benefit where—

(a) the entitlement to the age related benefit at a minimum age applies to a member who is an active or prospective member of the scheme on 1st December 2006;

(b) the age related benefit may be paid, at a minimum age, to the active or prospective member either with or without consent (whether of an employer, the trustees or managers of the scheme or otherwise); and

(c) the age related benefit is enhanced in one or more of the ways specified in sub-paragraph (2).

(2) For the purposes of sub-paragraph (1)(c) the specified ways are the enhancement of any age related benefit payable to or in respect of the member calculated in one or more of the following ways—

(a) by reference to some or all of the years of prospective pensionable service a member would have completed if he had remained in pensionable service until normal pension age;

(b) by reference to a fixed number of years of prospective pensionable service;

(c) by making an actuarial reduction which is smaller than if early retirement had been on grounds to which paragraph 12 applies; or

(d) by not making any actuarial reduction for early retirement.

(3) Sub-paragraph (1) shall also apply to different minimum ages for different groups or categories of active or prospective members.

13A. Paragraph 13 shall continue to apply to any member who after 1st December 2006—

(a) joins a scheme as a result of a block transfer or relevant transfer;

(b) joins a scheme as a result of a block transfer or relevant transfer from a scheme to which paragraph (a) applied; or

(c) joins a scheme on the basis that it will provide the same benefits as those provided by the scheme to which paragraph 13 applied.

13B. —(1) A minimum age for any member of a scheme for payment of or entitlement to a particular age related benefit on the grounds of redundancy where it is enhanced in accordance with sub-paragraph (2) and paid either with or without consent (whether of an employer, the trustees or managers of the scheme or otherwise).

(2) The enhancement of any age related benefit payable to or in respect of a member on the grounds of redundancy where the enhancement is calculated in one or more of the following ways—

(a) by reference to the years of prospective pensionable service a member would have completed if he had remained in pensionable service until normal pension age;

(b) by reference to a fixed number of years of prospective pensionable service;

(c) by making an actuarial reduction which is smaller than if early retirement had been on grounds to which paragraph 12 applied; or

(d) by not making any actuarial reduction for early retirement.

(3) Sub-paragraph (1) shall also apply to different minimum ages for different groups or categories of members. ” .

Different early and late retirement pivot ages

12. For paragraph 14 of Schedule 2 (different early and late retirement pivot ages) substitute—

“ 14. An early retirement pivot age or a late retirement pivot age including—

(a) different such ages for different groups or categories of member, and

(b) any early retirement pivot age or late retirement pivot age for deferred members which is different than for active members. ” .

Ill health benefits and death benefits

13. —(1) For paragraph 15 of Schedule 2 (ill health benefits) substitute—

“ 15. —(1) A minimum age for any member of a scheme for payment of or entitlement to a particular age related benefit on the grounds of ill health where the age related benefit is enhanced in accordance with sub-paragraph (2) and paid either with or without consent (whether of an employer, the trustees or managers of the scheme or otherwise).

(2) The enhancement of any age related benefit payable to or in respect of a member on the grounds of ill health where the enhancement is calculated in one or more of the following ways—

(a) by reference to some or all of the years of prospective pensionable service a member would have completed if he had remained in pensionable service until normal pension age;

(b) by reference to a fixed number of years of prospective pensionable service;

(c) by making an actuarial reduction which is smaller than if early retirement had been on the grounds to which paragraph 12 applied; or

(d) by not making any actuarial reduction for early retirement.

(3) Sub-paragraph (1) shall also apply to different minimum ages for different groups or categories of members.

15A. —(1) The calculation of any death benefit payable in respect of a member—

(a) by reference to some or all of the years of prospective pensionable service a member would have completed if he had remained in service until normal pension age; or

(b) by reference to a fixed number of years of prospective pensionable service.

(2) Payment after a member’s death of a death benefit calculated by reference to the period remaining in a pension guarantee period.

(3) For the purposes of sub-paragraph (2), a pension guarantee period means a fixed period specified in or permitted by the scheme rules beginning on—

(a) the date on which the payment of pension to or in respect of the member began, or

(b) if specified in the scheme rules, the date of the member’s death on or after normal pension age where payment of pension to or in respect of him had not begun.

(4) Any difference between the death benefits payable in respect of deferred members who die before normal pension age and the death benefits payable in respect of deferred members who die on or after normal pension age. ” .

Bridging pensions and state scheme integration

14. —(1) For paragraph 16 of Schedule 2 (additional pensions paid to male members) substitute—

“ 16. —(1) Any rule, practice, action or decision where—

(a) the rate of pension to which a pensioner member is entitled is reduced at any time between age 60 and 65 (“the reduction date”), by either —

(i) an amount not exceeding the relevant state retirement pension rate at the reduction date, or

(ii) the rate of the pension in payment where on the reduction date the relevant state retirement pension rate is greater than the rate of that pension;

(b) from the date a member is entitled to present payment of a pension from a scheme he is entitled to an additional amount of pension which does not exceed the amount of the basic state retirement pension plus the additional state retirement pension that would be payable at state pension age; or

(c) a member who reaches his state pension age is not entitled to, or no longer entitled to, an additional amount of pension which does not exceed the amount of the basic state retirement pension plus the additional state retirement pension that would be payable at state pension age.

(2) For the purposes of paragraph (1)—

“relevant state retirement pension rate” has the same meaning as in paragraph 2(5) of Schedule 28 to the Finance Act 2004 ( 17 ) ;

“state pension age” means the pensionable age specified in the rules in paragraph 1 of Schedule 4 to the Pensions Act 1995 ( 18 ) . ” .

Reduction of pensions payable to younger dependants

15. In paragraph 17 of Schedule 2 (reduction of pension payable to a dependant)—

(a) before “reduction” insert “actuarial”; and

(b) after “pension payable” insert “from a scheme”.

Life cover

16. In paragraph 18 of Schedule 2 (life assurance cover to ill health retirees)—

(a) after “who have retired” insert “from a scheme”; and

(b) omit “before any early retirement pivot age”.

Amendment of paragraph 19 of Schedule 2

17. In paragraph 19 of Schedule 2 (differing amounts of benefit attributable to differing lengths of service) for “defined benefits arrangement” substitute “scheme”.

Targeted and capped accrual

18. After paragraph 19 of Schedule 2 insert—

“ 19A. —(1) Any differences in—

(a) the fraction of pensionable pay at which any age related benefit accrues, or

(b) the amount of death benefit,

to or in respect of active or prospective members of a scheme where the differences are attributable to the aim specified in sub-paragraph (2).

(2) The aim referred to in sub-paragraph (1) is that members in a comparable situation will have the right to age related benefit or death benefit equal to the same fraction, proportion or multiple of pensionable pay—

(a) without regard to each member’s length of pensionable service under the scheme, and

(b) provided that each member continues in pensionable service under the scheme until normal pension age.

(3) Any differences in age related benefits which accrue, or entitlement to any death benefits which arises, to or in respect of active or prospective members of a scheme who are in a comparable situation where—

(a) those differences are attributable to the aim specified in sub-paragraph (2), and

(b) the member’s pensionable service under the arrangement ceases before normal pension age.

(4) Where sub-paragraph (1) applies, any limitation on the amount of any age related benefit or death benefit payable from a scheme where the limitation arises from imposing one or both of the following—

(a) a maximum amount on the age related benefit or death benefit which is equal to a fraction, proportion or multiple of the member’s pensionable pay, or

(b) a minimum period of pensionable service.

19B. Where paragraph 19A applies, different rates of member or employer contributions according to the age of the members by, or in respect of whom, contributions are made, where for each year of pensionable service members in comparable situations accrue different fractions of pensionable pay. ” .

Limits on benefits

19. For paragraph 21 of Schedule 2 substitute—

“ 21. —(1) Any limitation on the amount of any age related benefit or death benefit payable from a scheme where either or both sub-paragraphs (2) and (3) apply.

(2) The limitation results from imposing a maximum number of years of pensionable service by reference to which the age related benefit or death benefit may be calculated.

(3) The limitation arises from imposing a maximum amount on the age related benefit or death benefit which is equal to a fraction, proportion or multiple of a member’s pensionable pay. ” .

20. For paragraph 22 of Schedule 2 substitute—

“ 22. Any rule, practice, action or decision where any age related benefit or death benefit is only payable from a scheme where a member is entitled to short service benefit under section 71 of the Pension Schemes Act 1993 (basic principles as to short service benefit) ( 19 ) . ” .

21. For paragraph 24 of Schedule 2 substitute—

“ 24. Any limitation on the amount of any age related benefit or death benefit payable from a scheme where the limitation—

(a) relates to—

(i) all members who joined, or who became eligible to join the scheme on, after or before a particular date; or

(ii) any group or category of members who joined, or who became eligible to join the scheme on, after or before a particular date; and

(b) results from imposing a maximum level of pensionable pay by reference to which the age related benefit or death benefit may be calculated. ” .

Closure of sections of schemes

22. After paragraph 25 of Schedule 2 insert—

“ Closure of sections of schemes

25A. —(1) The closure of any section of a scheme, from a particular date, to workers who have not already joined it.

(2) For the purposes of paragraph (1)—

(a) a scheme may be divided into two or more sections, and

(b) a section of a scheme shall mean any of the groups in sub-paragraph (3).

(3) A section of a scheme shall mean any of the following—

(a) any group of members who became eligible to join, or who joined, the scheme on, after or before a particular date on the basis that particular benefits will be provided to or in respect of those members or that a particular level of contributions will be paid in respect of those members; or

(b) any group of members who became eligible to join, or who joined, the scheme as a result of a block transfer or relevant transfer. ” .

Amendment of paragraphs 27 and 28 of Schedule 2

23. In paragraphs 27 and 28 of Schedule 2 (other rules, practices actions and decisions) after “different rates is to maintain” in both places insert “or more nearly maintain”.

Finance Act 2004: registered pension schemes

24. In paragraph 30 of Schedule 2 (registered pension schemes)—

(a) in sub-paragraph (1)—

(i) omit “Subject to sub-paragraph (2)”;

(ii) before “registered pension scheme” insert “scheme which is a”; and

(b) omit sub-paragraph (2).

Personal pension schemes

25. In paragraphs 31 and 32 of Schedule 2 (contributions by employers to personal pension schemes) after “an employer” insert in both places “to a personal pension scheme”.

26. In paragraph 31 of Schedule 2—

(a) in sub-paragraph (a), for “amount of benefit” substitute “amount of age related benefit, derived from contributions made each year by the employer,”;

(b) for sub-paragraph (b) substitute—

“ (b) to make more nearly equal the amount of the age related benefit, derived from contributions made each year by the employer, to which workers of different ages who are otherwise in a comparable situation will become entitled under their personal pension schemes. ” .

27. After paragraph 32 of Schedule 2 (excepted rules, practices, actions and decisions relating to contributions by employers to personal pension schemes) insert—

“ 33. Any limitation on any contributions by an employer, to a personal pension scheme, by reference to a maximum level of remuneration.

34. A minimum age for commencement of payment of contributions by an employer to a personal pension scheme in respect of a worker.

35. Different minimum ages for commencement of payment of contributions by an employer to a personal pension scheme in respect of different groups or categories of workers.

36. Equal rates of contributions by an employer to a personal pension scheme irrespective of the age of the workers in respect of whom contributions are made. ” .