Flexible Retirement and Pension Provision

11 January 2010

Summary

The "Flexible Retirement and Pension Provision: Government response to the consultation on draft regulations" has recently been published by the Department for Work and Pensions (“DWP”). The responses received to the consultation have led the Government to drop its plans to introduce exceptions to the Employment Equality (Age) Regulations 2006 (the “Age Regulations”). These exceptions would have allowed flexible retirement arrangements to be created.

Age Regulations exceptions and occupational pension schemes

The Age Regulations apply to occupational pension schemes. In late 2008, the DWP consulted on alternative sets of draft regulations that would add further exceptions to the non-discrimination rules in the Age Regulations. This was in order to allow the creation of flexible retirement arrangements in occupational pension schemes that would otherwise be discriminatory under the Age Regulations.

“Option 1 and 2” were discussed and draft regulations published for consultation. However, in an unexpected announcement, the Government have decided not to introduce either of the options or any further exceptions relating to flexible retirement. This decision has been reached by the DWP because of the responses it had received during its consultation on the exceptions it had proposed.

Existing flexible retirement arrangements sufficient

A number of the responses to the consultation questioned the need to bring either of the options into force. For instance, Age Concern stated in its response that:

“We do not think there is robust evidence to show that the current law gives rise to a genuine barrier to flexible retirement...”

Some respondees stated that they had been involved in flexible retirement arrangements that had been created lawfully within the existing legislation. Others stated that there was no reason why the concept of flexible retirement should be discriminatory under the Age Regulations, in properly created arrangements.

On the other hand, the DWP acknowledged that there were some organisations that would like the Government to publish further guidance on flexible retirement, the Age Regulations and occupational pension schemes. Some felt that without further guidance, a number of trustees would be deterred from or not able to create flexible retirement options for their pension schemes.

Further guidance

The DWP has noted these concerns and has announced that further guidance is likely to be included as part of the documentation surrounding the Equality Bill. No date has been provided by which this guidance will be provided. We will keep you informed of developments.