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Accidental Age discrimination within USS rules?

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I'm wondering if there is a fundamental flaw in the Universities Superannuation Scheme in terms of age-discrimination. The rules state that an employee aged 50 (soon to be 55), with 5 years service who is made redundant can opt for early payment of benefits, with the employer picking up the 'early retirement funding charge'. (Normal unreduced retirement can be done at 60 under the rules)

Now imagine a situation where there is a two year fixed term position available. Two candidates with identical skillsets apply. One is 30 and at the end of the fixed term will get statutory redundancy based on 2 years, costing the employer £700.
The other is 53, and at the end of the contract will opt for retirement, costing the employer a figure based on early payment of benefits (say 5 years of pension @ £20k = £100k). Now I don't know how exactly they work out the 'early retirement funding charge'. I expect much of the £100k would be discounted, but even a figure of £50k must represent a significant factor to the prospective employer.
The 30 year old has an exit charge of £700. The 53 year old has an exit charge of £50k. Who would you employ?
But wouldn't that represent age-discrimination and be illegal?

Comments

  • Debt_Free_Chick
    Debt_Free_Chick Posts: 13,276 Forumite
    10,000 Posts Combo Breaker
    edited 15 May 2009 at 8:05AM
    Firstly, we need to bear in mind that this is "new law" and it will continue to develop as and when cases are brought to Court/Tribunal. So any comments I and others make are largely speculative, based on our interpretation of the regulations.

    Now then - age discrimination can be lawful, provided it is objectively justified.

    I would have thought that if the employer does not have the money to pay the enhanced early retirement pension to the 53 yo, then that could be objective justification. As redundancies generally have a "saving money" feature about them, I can imagine that choosing the cheaper redundancy could possibly be OK, as age was simply a "co-incidence" rather than the deciding factor.

    I doubt the cost would be as much as you imagine, though. The only payment being made by the employer is that to fund the difference between the normal, reduced pension and the enhanced pension. And an immediate payment may not be necessary, if the scheme is sufficiently well-funded to bear the cost, without any more money going in. Indeed, the employer(s) might be paying higher contributions all along, to fund this sort of benefit.

    All of this assumes that the cost of the providing the extra pension for the older employee is actually the deciding factor - the tie-breaker. Of course, there could be some other tie-breaker.

    All IMHO, of course.
    Warning ..... I'm a peri-menopausal axe-wielding maniac ;)
  • SnowMan
    SnowMan Posts: 3,681 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    olbas_oil wrote: »
    But wouldn't that represent age-discrimination and be illegal?

    No. Almost certainly not age discrimination, only doubt is the 5 year requirement. See the DTI guidance on this matter.

    Allowing enhanced payment of redundancy benefits at age 50 or 55 is allowed even though this option would not be available to a 30 year old. (See page 24 of above link). There is no requirement for the employer to objectively justify this.

    The 5 year requirement is OK provided it meets a business need (see page 18 of the above link) e.g. encouraging loyalty or rewarding experience.
    I came, I saw, I melted
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