Anti-ageism laws could trigger reduced pension benefits

Employers could be forced to reduce pension benefits or set up a costly trust because of the shake-up of age discrimination rules, consultancy Mercer warned.

With the consultation period on the Department for Work and Pensions proposals for pension treatment under age discrimination rules set to close tomorrow (Friday), Mercer Human Resource Consulting warned that if the regulations were implemented in their current form, at least a third of pension schemes could be affected.

Dr Deborah Cooper, principal at Mercer, said the draft regulations would severely restrict employers’ ability to have more than one section in their pension scheme. 

For example, she said it would make it difficult for employers to have some staff signed up for final salary pension schemes while others were reliant on the performance of the stock market through their money purchase plans.

Cooper said: “This is because it is deemed indirectly discriminatory for members of the same scheme to receive different levels of benefits, since new employees are generally likely to be younger than existing scheme members.

“Consequently, employers may be forced to either set up a new scheme under a different trust, which can be complicated and expensive, or offer all scheme members the same benefits in future. 

“In many cases, this will mean all employees are moved into a defined contribution scheme, which is likely to result in benefits being reduced.”

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