In this case, a claim was taken before the Danish national courts against a Danish company by a former employee on the ground that the company’s payment of age-related contributions to its defined contribution (DC) scheme amounted to unlawful age discrimination.  Under the employee’s contract, contributions payable to the scheme were dependent upon age as follows:

• < 35 years: employee 3%, employer 6%
• 35 – 44 years: employee 4%, employer 8%
• 45+ years: employee 5%, employer 10%

The Danish national court referred certain questions to the EU Court of Justice, including whether the differences could be justified under the Equal Treatment Directive (Directive 2000/78).  This Directive provides that a difference in treatment on grounds of age does not constitute discrimination if, within the context of national law, it is objectively and reasonably justified by a legitimate aim and the means of achieving that aim are appropriate and necessary.

The EU Court was satisfied that the following reasons given for the age-related contributions could be regarded as legitimate:

• Higher contributions for older workers enable those who enter employment at a later stage in their working life to build up reasonable retirement savings over a relatively short period.
• Lower contributions for younger workers allow them to have at their disposal a larger proportion of their wages.
• The cost of covering the risks of death, incapacity and serious illness increases with age, thereby justifying higher contributions for older members.

The Court held that it was for the Danish court to determine whether the age-related contributions in this case attained those aims in a “consistent and systematic manner”, while ensuring that they did not go beyond what was necessary to achieve them.

Comment
While the Pensions Act 1990 specifically permits age-related pension contributions to a DC scheme (provided that they are an appropriate and necessary way to achieve a legitimate objective), this judgment provides some welcome reassurance to employers and trustees that it would be difficult to successfully challenge age-related contributions where they can be objectively justified.

HK Danmark v Experian A/S EUECJ C-476/11