Equality Officer's Decision
Local Government Computer Services Board
(represented by Ms Ger Moriarty, Local Government Management Services Board)
File reference: EE/2008/901
Date of issue: 26th August 2010
Keywords: Pensions Acts, Collective Agreement, Age, Rules of Occupational Pension Scheme
1.1 This dispute concerns a complaint by Mr Sean Grey against the Local Government Computer Services Board (LGCSB). The complainant alleges that he was discriminated against on the ground of age contrary to the Employment Equality Acts 1998-2008 [hereinafter referred to as the 'Employment Acts'] and the Pensions Acts 1990-2008 [hereinafter referred to as the 'Pensions Acts']. Mr Grey has also made a complaint that the Voluntary Early Retirement Scheme that he availed of is a collective agreement within the meaning of the Acts and that a term in it does not comply with the principle of equal pension treatment.
1.2 The complainant referred his complaint under the Acts to the Director of the Equality Tribunal on 23rd December 2008. In accordance with her powers under Section 75 of the Employment Acts, the Director delegated the case on 12th February 2009 to me, Orlaith Mannion, an Equality Officer, for investigation, decision and for the exercise of other relevant functions under the Part VII of the Act. This is the date I commenced my investigation. Submissions were received from both parties and a joint hearing was held on Wednesday 11th November 2009. The final piece of correspondence was received from the respondent's representative on 25th March.
2. Summary of the complainant's case
2.1 The complainant is a retired officer of the Local Government Computer Services Board (LGCSB) with 35.274 years of actual service in the local government sector at his retirement on 19th April 2009. He was 61 years of age. The LGCSB offered a Voluntary Early Retirement Scheme (VER) to employees on 18th July 2008. This VER was devised in 1987 and therefore it predates the Employment Equality Acts and the equality provisions of the Pensions Acts. He submits that the VER Scheme discriminates against employees over 58 years of age without any legitimate aim other than to save money.
2.2 This VER scheme awards extra service to staff in respect of each year of service remaining to retirement at the date of early retirement subject to a maximum of seven years being added where an employee has 20 years or more service. Under the Local Government Superannuation Scheme the maximum service that can be used for calculation of pensions and lump sums is 40 years and the latest age to which service is attainable is 65. The complainant submits that it is age discrimination in disguise as it reduces the number of years that may be added for people over 58. The complainant submits he should be entitled to receive the full 7 years. However, because of his age he is awarded 3.6137 years. Therefore, instead of achieving the maximum pensionable service for his grade of 40 years, Mr Grey's pension and lump sum is calculated based on 38.8877 (35.274 +3.6137) years. Mr Grey submits the financial loss to him is €93,259. Mr Grey points out that if he were 1 year and 41 days younger he would be entitled to the full pension under the VER.
2.3 He gives an example of a colleague with 27.2671 years actual service who would have been 57 when he took early retirement but was entitled under the scheme to get the benefit of 7 years which brought his total pensionable service to 34.2671 years. This is almost double the added years that the complainant was awarded. The complainant submits that staff between 58 and 65 (with 20 years service) are awarded less notional service and consequently less financial benefits than staff under 58 with the equivalent service
2.4 The complainant suggests a number of hypothetical examples which show of employees of different ages are treated under the scheme e.g. a younger employee with equal service gets more added years and a younger employee with less service gets more added years (see table at 4.5). The complainant cites Perry and the Garda Commissioner as an authority as to why this is discrimination. He also argues that people aged 58 and over with 40 years service get a preferential deal in that they were also offered a severance package of 2 weeks of pay per year of potential service to age 65 in addition to their pension.
2.5 Mr Grey does not argue that the compulsory retirement age at 65 is discriminatory as that was part of his terms and conditions of employment and he was aware of that from the day he began employment with the respondent.
3. Summary of the respondent's case
3.1 Mr Grey applied on 4th July 2008 to retire from the LGCSB and requested that the VER Scheme be made available to him. On 18th July 2008, the LGCSB offered a voluntary early retirement option to all staff over 50. Approval to offer this scheme had been given by the LGCSB's parent department - the Department of Environment, Heritage and Local Government - in compliance with a recommendation by a review of the LGCSB that staffing numbers be reduced. On 22nd August 2008, the respondent issued a letter to Mr Grey acknowledging his expression of interest in the scheme. Following some discussions regarding an appropriate retirement date and determination of his benefits entitlement under the Local Government Superannuation Scheme, a further letter issued to Mr Grey on 3rd October 2008 advising him that the Director had agreed to his early retirement with effect from 19th April 2009.
3.2 Mr Grey emailed Ms B, Assistant Director of LGCSB on 18th November 2008 stating that he believed the VER offered was discriminatory on the age ground. The LGSCB responded and continue to say that:
- the VER scheme which was offered, was directed by the Minister for Environment, Heritage and Local Government in line with terms agreed with the Minister for Finance
- as an agency under the aegis of the Department of Environment, Heritage and Local Government the LGCSB had to seek sanction to implement a VER scheme
- it was not within the remit of the LGCSB to amend or alter the terms and conditions of the scheme which was similar to what was on offer in the broader public sector
- the scheme was constructed to allow credit for service up to the standard age of retirement subject to a maximum of 40 years service
- the VER is not based on age but on actual service plus a bonus calculation of potential service to the contractual age of retirement
- Under the terms of the scheme, an employee of any age with 40 years or more of service would not be entitled to ANY added years
- the VER scheme remains as heretofore.
3.4 The respondent states it can avail of the defence under Section 72 of the Pensions Act (as amended by Section 22 of the Social Welfare Miscellaneous Provisions Act 2004). The number of added years provided to Mr Grey is based on length of potential service to the date of his retirement as per the terms and conditions included in his contract of employment:
You will be required to cease holding office on reaching the age of 65 years as specified by the Local Government Superannuation Scheme 1998.
3.5 The respondent submits that in no circumstance would Mr Grey have been entitled to 7 added years. Under the terms of his contract of employment, the date of his retirement is his 65th birthday. It is not within the terms of the Local Government Superannuation Scheme to grant Mr Grey more added years for pension or lump sum purposes than he would be able to gain through working to his contractual retirement age if he had not applied for a VER. Granting an additional 7 years service would mean he would gain more service for pension and lump sum purposes than an individual with similar service at 19th April 2009 who did not avail of the VER scheme and who worked until their retirement age. The respondent also emphasises that the VER is a voluntary scheme. They submit that the scheme is not designed to have an individual come out with a greater pension entitlement than could have been achieved had that person remained in employment up to age 65. In response to a restructuring need by the organisation, the purpose of the VER was to offer an enticement to leave their employment early and to somewhat negate the negative effects on pension entitlements which would normally occur.
3.6 Regarding the severage package, the respondent submits that Mr Grey was also offered access to this option but the early retirement deal was more beneficial to him. For people with full pensionable service (40 years) notional service could not be awarded to them under the rules of the VER. Therefore, the severance gratuity option, which was also offered as an option to Mr Grey, was more attractive to them not because of their age but because of their actual service.
4. Conclusions of the Equality Officer
Applicability of the Employment Equality Acts or Pensions Acts
4.1 The complainant has made complaints under both the Pensions Acts and the Employment Equality Acts. Following consideration of Section 70(1) of the Pensions Acts, Section 2(4) of the Employment Equality Acts and the definition of pension rights included in Section 2(1) of the Employment Equality Acts, I am satisfied that this claim under the Employment Equality Acts is misconceived. Therefore, I am dismissing this claim under Section 77A of the Employment Acts as misconceived and will be considering the complaint under the Pensions Acts.
4.2 The next issue to be decided on is whether the Early Retirement and Redundancy Scheme for Local Government Staff contained in Circular Letter S.9/88 and Part VI of S.I. No. 455 of 1998 Local Government (Superannuation) (Consolidation) Scheme 1998 is a collective agreement or employment regulation order or registered employment agreement as defined in Section 81C of the Pensions Acts. Having considered the definitions of the above, I am satisfied that it is not any of these. Consequently, I do not have jurisdiction to examine whether a provision of the aforementioned statutory instrument complies with the principle of equal pension treatment.
Rules of occupational pension scheme
4.3The issue for me to decide is whether or not Mr Grey was discriminated on the grounds of age in terms of Section 66 (2)(f) and in contravention of Section 70 of the Acts by the LGCSB in relation to the rules of an occupational pension scheme. Section 66 (1) of the Acts provides that discrimination shall be taken to occur where, on any of the grounds mentioned in subsection (2) one person is treated less favourably than another is, has been or would be treated.
4.4 Section 76 of the Acts sets out the burden of proof which applies to claims of discrimination:
Where in any proceedings facts are established by or on behalf of a complainant from which it may be reasonably inferred that there has been a breach of the principle of equal pension treatment in relation to him, it is for the respondent to prove the contrary.
4.5 The table below outlines how the VER applies to the complainant and notional comparators as well as his named comparator:
Sean Grey Notional comparator A Notional comparator B Notional Comparator C Named Comparator
Age 61+141 days 59+364 days 60 +1 day 57+364 days 57+114 days
Notional pensionable salary* 100,000 100,000 100,000 100,000 100,000
Actual service to 19/4/2009 35.274 35.274 35.274 35.274 27.2671
Potential service to 40 years 4.726 4.726 4.726 4.726 12.739
Potential service to age 65 3.6137 5.003 4.997 7.003 7.6877
Actual added years (lesser of potential service to 40 years or to age 65 or 7 years) 3.6137 4.726 4.726 4.726 7
Total pensionable service 38.8877 40 40 40 34.2671
Lump sum ( salary x pensionable service x 3/80) €145,828.88 €150,000 €150,000 €150,000 €128,501.62
Pension (salary x pensionable service x 1/80 €48,609.63 €50,000 €50,000 €50,000 €42,833.25
* This was not the real salary of the complainant; it was chosen for comparative purposes.
4.6 Now, I will consider whether the respondent is entitled to avail of the defence in Section 72 of the Pensions Acts:
72. -- (1) It shall not constitute a breach of the principle of equal pension treatment on the age ground for a scheme to --
(a) fix age or qualifying service, or a combination of both, as a condition or criterion for admission to the scheme,
(b) fix different ages or qualifying service, or a combination of both, as conditions or criteria for admission to the scheme for employees or groups or categories of employees,
(c) fix age or qualifying service, or a combination of both, as a condition or criterion for entitlement to benefits under the scheme,
(d) fix different ages or qualifying service, or a combination of both, as conditions or criteria for entitlement to benefits under the scheme for employees or groups or categories of employees,
(e) (i) fix age or qualifying service, or a combination of both, as a condition or criterion in relation to the accrual of rights under a defined benefit scheme or in relation to the level of contributions to a defined contribution scheme, or
(ii) fix different ages or qualifying service, or a combination of both, as conditions or criteria in relation to the accrual of rights under a defined benefit scheme or in relation to the level of contributions to a defined contribution scheme for employees or groups or categories of employees,
where, in the context of the relevant employment, to do so is appropriate and necessary by reference to a legitimate objective of the employer, including legitimate employment policy, labour market and vocational training objectives,
(f) use criteria as to age in actuarial calculations:
Provided that this does not result in a breach of the principle of equal pension treatment on the gender ground.
4.7 If the income foregone is ignored, the notional comparators who are younger than the complainant are treated more favourably although his actual comparator is not. However, I am satisfied that it was a legitimate objective of the LGSCB (following a recommendation by a review body) to attempt to reduce headcount by introducing a voluntary early retirement scheme. I find that it is appropriate and necessary that the rules of the scheme i.e. that nobody may gain benefits beyond what they would have got had they reached the age of 65 or completed 40 years of pensionable service apply to all members, irrespective of age. I also find that it is appropriate and necessary that a sliding scale of notional service be applied to take account of the effects of income foregone. Therefore, the LGCSB is entitled to avail of this defence.
4.8 The complainant cited Perry in defence of his claim. In distinguishing this instant case from Perry, severance gratuities rather than pensions were considered i.e. it was taken under the Employment Acts rather than the Pensions Acts. In that case, (all other things being equal) Employee X aged 60 and 1 day would obtain £900 less than Employee Y who was 59 and 364 days in a severance package. This disparity was clearly based on age only. In this instant case, Employee X and Employee Y would obtain identical pensions and lump sums as it would be the lesser of potential service to 40 years or age 65 or 7 years.
I have concluded my investigation of Sean Grey's complaint under the Pensions Acts. Based on all of the foregoing, I find, pursuant to Section 81H of the Acts, that the respondent is entitled to avail of the defence in Section 72 of the Pensions Acts.
26th August 2010