A doctor left a pension scheme to avoid tax penalties. Years later, his employer set up a scheme to compensate those affected. It wasn't indirect age discrimination to limit the retrospective effect of the scheme.
Facts
Mr Leinhardt began employment with the NHS in August 1982. He started working at Harrogate and District NHS Foundation trust (“the Trust”) in September 1995 as a consultant general surgeon.
Mr Leinhardt was a member of the NHS pension scheme. In 2013, he decided to defer his membership of the scheme for tax reasons. He ceased active membership of the pension scheme on 30 September 2013 when he was 54.
In January 2016 Dr Tolcher (Chief Executive Officer of the Trust) suggested that, instead of simply giving up the pension contributions, those who were approaching their Lifetime Allowance should instead have the option of having their pension contribution rolled into their basic salary with the payment of a Pension Restructuring Payment(PRP) To be eligible for this scheme employees had to
be approaching their Lifetime Allowance,
be current members of the NHS pension scheme, and
have their applications approved under at the discretion of the Trust (according to additional criteria including conduct and performance).
The scheme came into effect on 15 March 2018, but had retrospective effect so that anyone who met the criteria from 1 April 2016 would be eligible to apply.
Mr Leinhardt made a formal application for payment of the PRP but was denied as he had left the pension scheme some years before the 2016 cut-off point. At the time that the scheme came into existence Mr Leinhardt was 57 years of age. After being rejected from the scheme Mr Leinhardt handed in his notice of resignation. His employment ceased on 31 January 2018.
Mr Leinhardt brought a claim of indirect age discrimination. He alleged that the criteria for payment of the PRP put those over the age of 55 at a disadvantage.
Decision
The Tribunal dismissed the claim of indirect discrimination.
Did the criteria put those over 55 at a disadvantage?
The eligibility for the scheme was dependent on an applicant being close to hitting their Lifetime Allowance (which was at £1.25m at the start of the scheme and since 6 April 2016 stands at £1m). As such, the scheme was only entered into by senior, high earning employees.
The scheme would also rule out anyone who, like Mr Leinhardt, had opted out of their pension scheme before the date of 1 April 2016. The Tribunal suggested that it was logical that this criterion would be likely to put those above the age of 55 at a disadvantage, so moved on to consider whether there was evidence to support this.
The evidence which the Tribunal used to judge whether the policy put those above the age of 55 at a disadvantage was as such:
There were a group of 12 employees who sought to benefit from the policy.
Of these 3 were refused eligibility, Mr Leinhardt was aged 57 when the policy came into effect and two others were 47 and 50.
Of the 9 who benefited, 3 were aged over 55 and the others were in the age range of 47-54.
The Tribunal’s conclusion from this was that the scheme benefited people of a variety of ages. It therefore could not point to any particular disadvantage affecting those aged 55+.
Was the policy a proportionate means of achieving a legitimate aim?
Although the Tribunal found that the policy did not put those over 55 at a disadvantage and Mr Leinhardt claim had therefore already failed, it went on to consider whether the policy could be justified as a proportionate means of achieving a legitimate aim.
Harrogate and District NHS Foundation Trust argued that the aim of the policy was to “encourage the retention of experience and highly paid staff”. The Tribunal was satisfied that this was a genuine legitimate aim.
On proportionality, the Tribunal recognised that because the money would have been paid to the pension regardless, the policy was cost neutral. The Tribunal held that although the arbitrary cut-off date may have seemed unfair to Mr Leinhardt, but this limitation to the retrospective effect meant that any offering of the benefit to those senior members of the team who had already made the decision to remain with the practice would have represented a “windfall” and not been cost effective. For these reasons, the policy was proportionate.
The judgment is available here.
Mr D Leinhardt v Harrogate and District NHS Foundation Trust: 1806833/2018