Occupational Pensions: Federal Labour Court confirmed its ruling with respect to so-called “age difference clauses” in pension arrangements

By judgment of 11 December 2018 (docket number: 3 400/17) the Federal Labour Court has ruled that a so-called “age difference clause” (Altersabstandsklausel) providing that a survivor’s benefit is reduced if the age difference between the spouses is more than 10 years is admissible and is not to be considered as unjustified discrimination on grounds of age.

The plaintiff was born in 1945. Her husband was born in 1930 and died in 2014. The spouses married in 1966. The plaintiff’s deceased husband was granted a survivor’s pension promise by his employer. The corresponding pension plan contained a clause according to which the survivor’s benefit is reduced by 5 % for each year that exceeds an age difference of 10 years. The plaintiff considered that clause to be inadmissible.

The Federal Labour Court ruled that the clause does not constitute inadmissible discrimination on grounds of age according to the General Law on equal treatment (Allgemeines Gleichbehandlungsgesetz) since the discrimination is justified. The employer who grants a survivor’s pension has a legitimate interest in limiting the associated financial risk. According to the Court, the age difference clause is also necessary and appropriate. It does not unduly prejudice the legitimate interests of the employees entitled to benefits who are affected by the clause. At an age difference of 11 years or more, the common standard of living of the spouses is designed in such a way that the survivor spends part of his life without the beneficiary (deceased former employee). In addition, with an age difference of 11 years or more only those spouses are excluded from benefits whose age difference from the beneficiary (deceased former employee) considerably exceeds the “usual” age difference between spouses. Moreover, the clause does not lead to a complete exclusion of benefits if the age difference is more than 10 years, but only to a moderate, gradual reduction that causes a complete exclusion only if the age difference is 30 years or more.

With this ruling the Federal Labour Court confirmed its earlier ruling of February 2018. In this previous decision, the Court also denied discrimination on grounds of age with respect to a clause providing that spouses receive a survivor’s benefit only if they are no more than 15 years younger than the deceased former employee. Until then, it had not been clarified by the highest court, whether age difference clauses with regard to survivor’s benefits are in in accordance with the General Law on equal treatment.