Disability Discrimination Act

United Kingdom

Simon Pilcher looks at the impact of the Disability Discrimination Act on pension benefits

The Disability Discrimination Act (the "Act") came into force on 2 December 1996. It applies to all employees regardless of their length of service and its provisions can be relied upon by all actual or potential members of an occupational pension scheme. This article reviews the law in this area and how it affects employers and trustees.

How does the Act work?

Who is protected by the Act?
All employees working for an employer with 20 or more employees in Great Britain are protected by the Act. Protection extends to contract workers, apprentices, members and potential members of trade unions as well as members and potential members of occupational pension schemes. Unlike some other areas of employment law, employers cannot exclude or limit the operation of any aspect of the Act, for example by having employees contract out of the Act when they sign their contracts of employment. Employees working wholly or mainly outside Great Britain are excluded from protection, as are certain employees working on board ships or aircraft.

What is a disability?
The Act defines disability as "a physical or mental impairment which has a substantial and long-term adverse effect on the ability to carry out normal day-to-day activities."

Mental impairment covers conditions resulting from or consisting of a mental illness that is clinically well recognised i.e. by a respected body of medical opinion and includes learning difficulties.

To be of a long term effect the impairment must have lasted at least 12 months or be likely to last for at least 12 months or the rest of the person's life if less than 12 months.

"Normal day to day activities" consist of the following:

  • mobility
  • manual dexterity
  • physical co-ordination
  • continence
  • the ability to lift or carry everyday objects
  • speech
  • hearing or eyesight
  • memory or ability to concentrate, learn or understand
  • perception of the risk of physical danger.


If somebody is receiving treatment for an impairment which alleviates or removes the effects of the impairment, but does not cure the impairment itself, the effect of that treatment is to be ignored. The only exception to this is the wearing of spectacles.

Progressive conditions, e.g. cancer, multiple sclerosis and HIV infection, are covered by the Act from the time when the condition leads to an impairment which has some effect on the person's ability to carry out their normal day-to-day activities. This is so even if the impairment does not have a substantial effect provided it can be shown that the impairment is likely to have a substantial effect at some point in the future.

The following conditions are excluded from the protection of the Act:

  • addiction to or dependency on alcohol, nicotine or any other substance other than one that is medically prescribed
  • seasonal allergic rhinitis e.g. hayfever
  • pyromania
  • kleptomania
  • exhibitionism
  • voyeurism
  • disfigurements which consist of a tattoo or non-medical body piercing.


What is discrimination?

An employer (or the trustees of an occupational pension scheme) discriminates against a disabled person if, for a reason relating to the disabled person's disability, he treats that person less favourably than he treats or would treat others who do not have a disability and he cannot show that the treatment in question is justified.


Treatment can only be justified if the reason for it is material to the circumstances of a particular case and it is essential.

Occupational pension schemes

Non-discrimination rule
The Act inserts into every occupational pension scheme a "non-discrimination rule". This means that the trustees of the scheme are prohibited from doing, or omitting to do, anything to members or potential members of the pension scheme that would be unlawful if the discrimination were done by the employer.

When is less favourable treatment justified?
It is possible for trustees to justify less favourable treatment towards a disabled person if the reason for it is "material" and "substantial". By way of example, trustees of a pension scheme would not be justified in excluding an employee from membership simply because they had a vision impairment as that fact, in itself, is no reason why he or she should not receive the same pension benefits as any other employee.

However, there are circumstances when a disabled person's health could lead to a substantial increase in the cost of providing benefits under the pension scheme. In this situation, it may be justifiable to treat the disabled person less favourably by, for example, applying different eligibility conditions. Before restricting a benefit, however, trustees should consider obtaining actuarial and possibly medical advice on whether there is a substantial increase in cost.

An example of where substantial additional costs might result in justifiable discrimination would be where an employer receives medical advice that an individual with multiple sclerosis is likely to retire early on health grounds. The employer obtains actuarial advice that the cost of providing that early retirement benefit would be substantially greater than for an employee without multiple sclerosis and on that basis the individual is refused membership of the scheme.

This type of justification can be used when a disabled person is considered for admission to the scheme. However, it cannot be applied to an existing member, unless the scheme rules or contract of employment allowed for this at the time the member was admitted to the scheme.

What benefits can be affected?
The possibility of providing different benefits to disabled persons applies to benefits payable on:

  • termination of service
  • retirement
  • old age
  • death
  • accident
  • injury, sickness or invalidity.


In addition, if the employer sets a uniform contribution rate for all employees, it may be justifiable to require a disabled person to contribute at that level notwithstanding that they may be eligible for different benefits, or benefits at a lower level than other members of the scheme.


The Act also applies to provision of group insurance, such as permanent health insurance or life assurance.

Practical steps for trustees
Although, in extreme circumstances, the Act would allow trustees to exclude a disabled member from membership of the scheme completely, this would probably not be necessary in the majority of cases. The main areas where trustees are likely to be justified in excluding or restricting benefits are for death and incapacity benefits. As already explained, these can be excluded or restricted if the trustees can show that the cost of providing these benefits is substantially greater for a disabled person than for other members of the scheme. If the benefits are insured then it is simply a matter of obtaining a quotation in respect of the particular member and analysing whether it is substantially greater than for an average member. Otherwise, it will be necessary for trustees to obtain actuarial advice.

One other point to bear in mind is that as long as the cost of providing the benefit for a disabled person is substantially greater than for an average member, the benefits can be excluded or restricted regardless of the funding position of the scheme. Therefore, even if the scheme is in surplus and no additional contributions would actually be needed, benefit restrictions would still be permissible.