Payment of ill-health retirement pension based on reduced hours did not amount to discrimination arising from disability


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The Supreme Court has held that a disabled person who had taken ill-health retirement with a pension based on the reduced hours he had been working as a result of his disability, rather than his full-time hours, had not suffered discrimination arising from his disability in Williams v The Trustees of Swansea University Pension & Assurance Scheme and another.

This is a useful decision for employers with pension schemes offering early ill-health retirement calculated on the basis of an individual's final salary before retirement.

Mr Williams suffered from Tourette's Syndrome, obsessive compulsive disorder, depression and other psychological problems. He had worked full-time for the University for ten years before reducing his hours by half as a result of reasonable adjustments agreed by the University. When he became incapable of continuing work he took ill-health retirement. Under the pension scheme rules he was entitled to an accrued pension and an enhanced pension based on his final salary at retirement. He claimed that the failure to base his pension on the full-time salary he had received prior to his reduction in hours amounted to unfavourable treatment because of something arising in consequence of his disability.

At first instance the employment tribunal held that Mr Williams had been disadvantaged by receiving a lower pension because his disability resulted in him working part-time. This amounted to less favourable treatment and the tribunal concluded that the pension scheme was discriminatory. Although the tribunal appeared to accept that the University had a legitimate aim to protect, it did not accept that the treatment had been a proportionate means of achieving that aim.

The Employment Appeal Tribunal (EAT) and then the Court of Appeal disagreed. The Supreme Court has also dismissed the appeal. It identified the relevant treatment of which Mr Williams complained as the award of a pension, pointing out that there is nothing intrinsically unfavourable or disadvantageous about that. The basis on which Mr Williams was entitled to an award was by reason of his disabilities. If he had been able to work full-time he would have no immediate right to a pension at all. As a result it could not be argued that his ill-health retirement entitlement was unfavourable treatment.

Take note: The policy behind an employer's duty to make reasonable adjustments is to help overcome barriers and disadvantages faced by disabled employees at work. It is not uncommon for employees who are suffering from a disability to reduce their hours (and correspondingly their pay) as a reasonable adjustment which enables them to continue working. If the employee then takes ill-health retirement it is likely that the provisions of any defined benefit pension scheme will base the pension on their final (reduced) salary at retirement or a career average, without requiring employers to incur the significant cost of making up the difference. It is a relief to employers to know that, following the decision in Williams, this is not discriminatory.

This article is taken from HR Law - January 2019.        

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