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Early-release scheme did not discriminate because of age

In Banks v Ministry of Defence, a tribunal decided that limits on the amount an employer would pay under a voluntary early-release scheme, to encourage turnover in the workforce, did not amount to either direct or indirect age discrimination.

Mr Banks’ employment was terminated under a discretionary early-release scheme, which allows staff to leave early in return for a severance payment, if the employer and employee agree. Payments under the scheme are dependent on the age of the employee at the time of release and the employer had a budget, which could not be exceeded. Mr Banks was given an early-release payment of £10,500 within the over-59s band (in addition to his full pension). Mr Banks claimed that he suffered direct and indirect age discrimination because, if he had been 59, he would have been entitled to £85,000.

The tribunal rejected both of Mr Banks’ claims. The employer had legitimate aims justifying the discriminatory impact: (i) to maximise early-release scheme leavers to refresh the workforce and enable reorganisations without redundancies; and (ii) a limited budget which could not be exceeded. And the means chosen was proportionate. Those who are 60 are entitled to immediate access to their pension without an actuarial reduction, but those under-60, get access to their pension with an actuarial reduction. Not paying enhanced severance payment to those aged 60 and over is therefore reasonable as they receive their full pension entitlement.

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