Age-related pension contributions not discriminatory

The European Court of Justice (ECJ) has ruled that age-related employer contributions to pension schemes are lawful and not discriminatory to employees.

The case of HK Danmark v Experion A/S 2013 concerned an organisation that set up a pension scheme for employees in Denmark with employer contributions at the following rates: 6% for under-35s, 8% for those aged between 35 and 44, and 10% for employees aged 45 and above.

The ECJ confirmed, under the Framework Directive, that the female who had brought the case was not discriminated against, because the reason for paying age-related contributions into the scheme, to allow older employees to build up retirement savings more quickly, was justified.

The court also held that the principle of age discrimination does not preclude age-related pension contributions.

Suzanne Burrell, pensions partner at law firm Shoosmiths, said: “The historic approach that employers have chosen to take in providing age-related contributions has been confirmed by the ECJ as being acceptable, provided that the domestic courts are happy that it can be objectively justified.

“The ECJ recognised the points made by the Danish government that age-related contributions help older people build up retirement savings more quickly and that risk benefits are more expensive to ensure for older people.

“[The ruling] is useful, because it concerns a lot of schemes, and allows age-related contribution practices to continue. There could be a scenario, where those are challenged, but this lends support to the view that any challenge could be successfully defeated.”