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Removal of PHI benefits was age discrimination

Posted by TonyBrownEmploymentSolicitor on October 7, 2013

Since age discrimination laws came into force, it has been unlawful for employers to cease to provide PHI to employees before they reach 65 or state pension age.

In the next case, an employer was found to have discriminated against an employee when it stopped paying him PHI benefits when he reached 55.

In that case, the Claimant was receiving payments from his employer, Capita, under a PHI scheme arranged between Capita and its insurance company. The payments under that scheme would stop when the Claimant reached 55. Capita switched to a more favourable PHI scheme which would have entitled the Claimant to receive PHI payments until he reached 65. However, the Claimant was denied the opportunity to join that scheme because the insurance company was not prepared to make PHI payments to any employee who was not "actively at work" when applying to join. The Claimant was already in receipt of benefits under the original PHI scheme and therefore not eligible for the new scheme.

A tribunal found that the removal of the Claimant’s PHI benefits when he reached 55 years old amounted to both direct and indirect age discrimination which Capita could not justify. The reason Capita stopped the Claimant’s membership of the PHI was on the ground of cost when it found out that the insurance company was not prepared to fund any further payments to the Claimant. A cost alone argument is usually not acceptable and equal treatment cannot depend on how much money happens to be.

Finally, on the facts of the case, the tribunal decided that the Claimant had a contractual right to receive his PHI payments until the age of 65 because an earlier purported variation of employment terms and the policy entitlement was ineffective.


The Equality Act 2010 does allow employers to stop providing access to insurance or a related financial service to employees when they reach age 65, or the state pension age, whichever is higher. However, employers need to justify withdrawing PHI at any age lower than this age.

If the insurer will not continue the cover past a certain age, this may be objective justification for ending the benefit. But employers may need to consider whether self-insurance is a viable option.

Another option is to reduce the cover for everyone to absorb the increased cost of extending the cover to staff over a certain age. This would remove the age issues, but unless the benefit is entirely discretionary, this could lead to claims for breach of contract.

If you would like advice about how the issues in this note apply to your situation, please contact Tony Brown on 01225 740097 or by e mail to

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