Facts

This judicial review claim was brought by 24 individual claimants and a 25th claimant, BALPA (the airline pilots union).  The individual claimants were members of one of four final salary pension schemes.  They sought to challenge the provisions of the Pensions Act 2004, which regulate compensation for their lost pension benefits if an employer becomes insolvent. The Act applies where the employer enters insolvency and the assets of pension schemes sponsored by their employers are insufficient to meet certain protected liabilities.

There was a compensation cap under the Act which meant that the members of the scheme who had not reached national pension age at the start of the assessment period would only receive 90% of a fixed annual compensation cap.  The cap was £27,777.78 in 2005, and had increased to £40,020.34 by 2019/20.  Members who had reached normal retirement age would receive 100% of their pension entitlement. 

The claimants said this was unlawful age discrimination.  They also said it was incompatible with Article 8 of Directive 2008/94/EC on the protection of employees in the event of the insolvency of their employer, which provides that at least 50% of the value of accrued pension entitlements must be provided on insolvency.  The High Court had found in favour of the claimants on the age discrimination point, and there was an appeal to the Court of Appeal.

Decision

The Court of Appeal agreed that capping the amount of compensation for pensioners who were below normal retirement age was unlawful age discrimination.

The Court confirmed that the protections provided by the 2008 Directive were a significant consideration in deciding whether the cap was justified.  They agreed with the original judge that the 90% limit was justified, as it was appropriate and necessary to achieve the aims of protecting employees in accordance with the Directive (which requires a guarantee of at least 50%).  However, the fixed financial cap was not.  This caused some individuals to have very substantial reductions in their pension benefits, and so failed to provide the protection required by the Directive. 

The judgment is available here.

Secretary of State for Work and Pensions and others v Hughes and others, [2021] EWCA Civ 1093, 19 July 2021