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The Employment Appeal Tribunal (EAT) has held in Pelter v Buro Four Project Services Ltd that an employer did not directly discriminate against an employee because of age when the employee's benefits under a PHI scheme ceased when he reached 65.

The claimant was a director and employee of Buro, and his service agreement made provision for permanent health insurance (PHI) benefits subject to "the rules of such PHI Scheme". The PHI scheme provided that once a member was incapacitated the terms and conditions of the policy immediately prior to their incapacity would determine their benefit. Membership ceased on the earliest of a number of events which included a member attaining "terminal age" which was stated in the policy to be 65. On 3 July 2011 Mr Pelter went on sick leave, in September 2011 he informed Buro he would not be returning to work and in November 2011 Buro submitted a claim under the PHI scheme.

On 3 January 2012 Mr Pelter's state pension age increased from 65 to 66. On 30 June 2019 Buro gave him 18 months' notice of termination of his employment, and on 13 August 2019 he issued tribunal proceedings for direct age discrimination on the basis that the provision of his PHI benefits was to cease when he reached 65. On 7 March 2020, when he was 65, he stopped receiving PHI benefits and his employment terminated on 31 December.

The EAT held that paragraph 14 of Schedule 9 to the Equality Act 2010 (EqA 2010) permits an employer to provide insurance for the benefit of its employees, pursuant to which benefits end when the employee reaches the greater age of 65, or state pension age. A scheme that does not gain the automatic protection of paragraph 14 can be justified under section 13(2) of the EqA (this provides that if the protected characteristic is age there will be no discrimination if it can be shown that the treatment is a proportionate means of achieving a legitimate aim). During the period that Buro provided Mr Pelter with access to the PHI Scheme it was lawful to provide employees with access to the benefit of a scheme that would provide payments that ended at 65. It was the insurer that ceased payment and not Buro. If Mr Pelter had still been at work when his state pension age increased to 66 it would have been "strongly arguable" that, if it wished to rely on the exception in paragraph 14, Buro would have needed to find insurance under which payment would be made until 66. Had it not done so it would still theoretically have been possible to establish that providing access to a scheme that did not provide benefits to state pension age was a proportionate means of achieving a legitimate aim for the purposes of section 13(2).

Take note: The decision in Pelter shows that it's important for employers to keep their PHI schemes under review. While in this case the claimant had been provided with access to the scheme before the increase to the state pension age from 65 to 66 and so his entitlement had crystallised before the change, if this had not been the case then his employer would have had to consider giving him access to a policy which allowed the PHI benefit to continue until the increased retirement age.