Mondaq Business Briefing -Herbert SmithUnited Kingdom - Sex Discrimination and the Lower Earnings Limit.

(From Mondaq.com)

The High Court held earlier this year that a deduction of the lower earnings limit from pensionable salary did not amount to indirect sex discrimination, even if employees are excluded from membership.

A number of occupational pension schemes effectively exclude from membership employees earning below the lower earnings limit (LEL) by only including those earnings above the limit in the calculation of benefits. This practice is aimed at ensuring broad integration between scheme benefits and state benefits: it avoids employees getting both the basic state pension and a scheme pension in respect of the same earnings. However, those earning below the LEL will not get a state pension unless the employees make voluntary Class 3 contributions.

This case concerned Mrs Shillcock, who was employed as a dinner lady by Uppingham School. Under the Rules of the Uppingham School Retirement Benefits Scheme, pension benefits were calculated by reference to that part of the annual salary that exceeded the LEL. The benefits included a death in service lump sum of twice the member's annual salary. Employees had to be invited to join the scheme by the school, and no employees who earned below the LEL were eligible to be invited.

Mrs Shillcock earned below the LEL and was not therefore eligible to join the Scheme. She complained to the Pensions Ombudsman that this amounted to sex discrimination on the basis that the exclusion effected more women than men. The Ombudsman upheld her complaint. The school and the trustees of the scheme appealed on a number of grounds, including the ground that there was no sex discrimination as the LEL deduction applied to all employees, regardless of sex.

The Judge considered whether Mrs Shillcock's exclusion from the pension scheme amounted to a difference in treatment between the sexes, and if so, whether there was any objective justification for the difference. The Judge found that there was no difference in treatment between the sexes on the basis that: "subtracting the LEL from the earnings of every employee for the purpose of assessing the pensionable salary involves a consistent, not a discriminatory approach to all categories of employee". Although not part of the conclusions of the case, the Judge also commented that the aim of integrating benefits with the State scheme would have amounted to an objective justification if it had been concluded that there had ...