Gurung & Ors, R (on the application of) v Secretary of State for Defence

The lawfulness of a transitional pension scheme depends on whether the chosen cut-off date has a rational connection with the problem addressed. A scheme may reflect materially different service conditions and retirement expectations before and after a change in the location and status of service. Retrospective improvement need not extend to every earlier year of service. Where public expenditure and pension policy are involved, the court must exercise considerable caution before finding irrationality, particularly where the scheme has been embodied in a statutory instrument. For Article 14 purposes, a difference arising indirectly from age-related dates or service periods is justified if the distinction has a rational basis and is proportionate. The same conclusion may satisfy both rationality review and the justification requirement under Article 14 read with Article 1 of Protocol 1.

The claimants were retired Gurkha soldiers who challenged the Gurkha Offer to Transfer and the Armed Forces (Gurkha Pension) Order 2007. The arrangements allowed transfer from the Gurkha Pension Scheme to an Armed Forces Pension Scheme. Service after 1 July 1997 generally transferred on a year-for-year basis, while earlier service was transferred at actuarial value, subject to a further adjustment for some serving Gurkhas.

The claimants alleged that the distinction was irrational and constituted indirect age discrimination contrary to Article 14 of the Convention, read with Article 1 of Protocol 1. The central issue was whether the chosen dates and mixed transfer method had a rational connection with the policy objectives and were objectively justified.

1. Claim dismissed. The challenge to the Gurkha Offer to Transfer and the Armed Forces (Gurkha Pension) Order 2007 failed.
2. The policy was not intended to provide a pension sufficient to enable a Gurkha to retire in the United Kingdom without further income. Its purpose was to adjust Gurkha pension arrangements to changed service conditions, UK basing and the altered expectation of retirement, while preserving the value of accrued rights and recognising the different assumptions applying before and after 1 July 1997.
3. The mixed approach was rational. Earlier service was earned when the Gurkha Pension Scheme and the expectation of retirement in Nepal remained applicable. Later service was treated differently because the Brigade had become UK-based and settlement in the United Kingdom had become available. The date therefore had a rational and clear connection with both the problem and the solution.
4. Retrospective improvement did not have to be applied to every year of service. Cost was legally relevant, and the court should be slow to interfere with decisions involving public expenditure, public-sector pension policy and the allocation of resources. The scheme fell within the range of responses open to a reasonable decision-maker.
5. For Article 14, the court adopted the question identified in R (Carson) v SSWP [2005] UKHL 37: whether there was enough of a real difference between the relevant groups to justify different treatment. The distinction was based principally on years of service before particular dates, rather than age itself. Even if it amounted to indirect age or other-status discrimination, it was rational, justified and proportionate.
6. The pension arrangements fell within Article 1 of Protocol 1 because a newly created contractual or statutory benefit may constitute a property right for eligible persons. The discrimination complaint nevertheless failed because the eligibility distinction was objectively justified. The claim was dismissed.