Insured benefits & age discrimination

With the state pension age rising from October 2020, could it be classed as age discrimination if certain insured benefits continue to cease at the age of 65 before employees reach their state pension age?

Possibly…

Why?

Under the Equality Act 2010, there is an automatic exemption from claims of age discrimination in relation to insured benefits which are withdrawn at a certain age.

It is accordingly not age discrimination if employees who are 65 or of state pension age (whichever is greater) are no longer entitled to insured benefits such as income protection and life assurance.

State pension age began to increase from the age of 65 on 6 March 2019. Between then and 6 October 2020 it has been gradually increasing to 66. On 6 October 2020 it will become 66 for all individuals.

Following this for the next six years that will remain the case, at which point another year of gradual change will increase the qualifying milestone to 67. During this gradual change to 67, the staggered state pension age will depend on your date of birth.

For example, someone born on the 10 April 1960 can claim their state pension after 66 years and 1 month, but someone born on 1 December 1960 can only do so after 66 years and 8 months. State pension age will then remain at 67 until 2044, at which point another period of gradual change will see it increase to 68.

It is likely that many employers will have an agreement or arrangement with their insurers for insured benefits to stop at the age of 65. This was acceptable under the terms of the Equality Act, but could now result in employers facing claims of age discrimination.

This is on the basis that the exemption only applies where insured benefits are withdrawn ‘when the employee attains whichever is the greater of (a) the age of 65, and (b) the state pensionable age.’ The exemption accordingly no longer applies to benefits being withdrawn at the age of 65, as the state pension age is greater than that.

If the employer’s actions fall within the exemption, this is a complete defence to any claim for age discrimination. If however an employer finds themselves outside the exemption and in a situation where benefits have been removed for employees, the employer will be required to respond to any age discrimination claims made.

These are likely to be for direct discrimination which would result in the employer having to show that its treatment of the employee(s) is not discriminatory because there is objective justification - i.e. that removing the benefit was for a good reason and was proportionate in the circumstances. A defence of simply reducing costs will not suffice, regardless if costs of insured benefits are much higher for these employee(s).

It should also be noted that for employers who self-insure, the exemption does not apply. A self-insuring employer will therefore need to have an objective justification if they have cease providing benefits at a particular age.

In light of these changes employers should check the agreements and arrangements in place with their insurers in relation to employee benefits and consider extending the period of cover, by linking it to each individual employee’s state pension age, wherever possible.