R(I) 2/00
(Hepple and Others. v. Adjudication Officer (C-196/98))

Mr. P. L. Howell QC	CI/16608/1996
8.5.98	CI/537/1998
	CI/1847/1997
	CI/1896/1997
	CI/2887/1995
ECJ	(G. C. Rodríguez, president, D. A. O. Edward and L. Sevón, presidents of chambers; P. J. G. Kapteyn, C. Gulmann, J.-P. Puissochet, G. Hirsch. P. Jann and H. Ragnemalm, judges; Advocate General: A. Saggio)
23.5.00		
Discrimination on grounds of sex – reduced earnings allowance – whether unequal age conditions linked to different pension ages for men and women contrary to Council Directive 79/7/EEC
The claimants were all in receipt of reduced earnings allowance. By virtue of the age conditions contained in Schedule 7, paragraphs 12 and 13, of the Social Security Contributions and Benefits Act 1992, and regulation 3 of the Social Security (Industrial Injuries)(Regular Employment) Regulations 1990 (as amended), their allowances were either replaced by retirement allowance or frozen. The claimants appealed to social security appeal tribunals. In two cases the appeals were refused and in three cases they were allowed. All the cases were appealed to the Commissioner, raising common questions relating to the unequal age conditions between men and women. The claimants contended that the conditions discriminated against them unlawfully on the grounds of sex, contrary to the provisions of Article 4 of Council Directive 79/7/EEC on the implementation of the principle of equal treatment in matters of social security. The adjudication officers submitted that the conditions were excluded from the scope of the Directive by virtue of Article 7. 
The Commissioner referred three questions to the European Court of Justice:
(i)	whether Article 7 permits a Member State to impose unequal age conditions linked to the different pension ages for men and women under the statutory old age pension scheme in the case of a benefit having the characteristics of reduced earnings allowance, where the inequality is not necessary for any financial reason and was imposed many years after the two schemes were commenced and after the latest date for the Directive to be given full effect, 
(ii)	if so, what are the considerations that determine whether such conditions in Great Britain from 1988-89 onwards are necessary to ensure coherence between the two schemes or otherwise fall within the permitted exclusion in Article 7, and 
(iii)	in the event that the unequal age conditions are not within the permitted exclusion in Article 7, how should the doctrine of direct effect be applied.
Held, that:
1.	from 1986, a succession of legislative amendments affecting reduced earnings allowance were adopted to reduce the number of persons entitled to receive it by discontinuing payment to persons no longer of working age through conditions based on the statutory retirement age. As a result of those changes there is coherence between reduced earnings allowance and the old age pension scheme, and the maintenance of the rules at issue is objectively necessary to preserve such coherence;
2.	discrimination of the kind at issue is objectively and necessarily linked to the difference between retirement age for men and women, so that it is covered by the derogation for which Article 7(1)(a) of the Directive provides.

REFERENCE TO THE COURT OF JUSTICE OF THE EUROPEAN UNION
BY THE SOCIAL SECURITY COMMISSIONER
PURSUANT TO EC TREATY ART. 177
Introduction
1.	These five cases are representative of numerous others stayed pending the preliminary ruling of the Court of Justice. They concern the “reduced earnings allowance” (REA), which is an earnings-related weekly cash benefit payable in Great Britain to people who have suffered an impairment of earning capacity from an accident at work or an occupational disease.
2.	In order to determine these and other appeals I have to decide the legal effect of provisions introduced into the national legislation after 1986 which purport to impose unequal age conditions on entitlement to REA. These conditions cause different weekly amounts to be payable to men and women whose circumstances are otherwise the same. 
3.	These cases are referred to the Court of Justice with the request for a preliminary ruling, as I am uncertain how the Community law on equal treatment (and in particular the Court’s decisions in cases C-328/91 Thomas [1993] ECR I-1247 and C-92/94 Graham [1995] ECR I-2521) ought correctly to be applied here. I have been assisted by detailed written and oral arguments on behalf of the claimants by Richard Drabble QC and Helen Mountfield, instructed by Richard Poynter and Bronwyn McKenna, solicitors; and on behalf of the adjudication officers by Christopher Vajda QC, instructed by the solicitor to the Secretary of State for Social Security.
The benefit
4.	REA is an earnings-related additional benefit under the statutory occupational accident and disease scheme now contained in Part V Social Security Contributions and Benefits Act 1992. It is payable to workers or former workers who have suffered an accident at work or an occupational disease, and its purpose is to compensate for an impairment of earning capacity. The weekly amount is based on a comparison between earnings in the original occupation which the accident or disease has prevented the claimant from continuing, and those in any (actual or notional) alternative occcupation still considered suitable despite the disablement. The normal maximum at present is about £40 per week, including cost-of-living increases added annually; though not all claimants qualify for these, as explained below.
5.	Earnings-related additions have formed part of the scheme since its inception in 1948. Originally they were known as “special hardship allowance” (SHA) but by the Social Security Act 1986 the benefit was re-cast and re-named as REA. The purpose and basic method of calculation remained the same throughout, and all awards of SHA were automatically converted into REA by transitional provisions.
6.	Under more recent legislation, the benefit is being phased out altogether. No fresh right to REA can arise from an accident suffered or disease contracted on or after 1 October 1990. However many thousands of people continue to be entitled to REA by virtue of accidents or diseases suffered earlier.
The scheme
7.	The provisions now in Part V Social Security Contributions and Benefits Act 1992 comprise a statutory social insurance scheme providing cover against accidents at work and occupational diseases.  It was constituted in 1948, separately from the pension and other social insurance schemes as well as from the means-tested social welfare schemes. Though known historically as the “Industrial Injuries Scheme”, it has at all material times applied to all persons in Great Britain in “employed earner’s employment”: that is all employees, but not self-employed people. Cover for employed earners is automatic, and compulsory. 
Contributory or not?
8.	It is also compulsory for all such earners and their employers to pay national insurance contributions, unless specially exempted (eg on the ground of very low pay). At least until 1990, employed earners’ and employers’ contributions included a proportion attributable to the cost of occupational accident and disease benefits: so that coverage for both SHA and REA may be called contributory. Conversely, full coverage applied from the first day at work, and there were no minimum contribution conditions: so it may also be said that the benefits were not contribution-dependent.   
Funding
9.	From the beginning of the present social insurance schemes in Britain in 1948, and down to 1975, two separate funds of assets were held: (i) the National Insurance Fund, from which the ordinary old-age pensions and other insured benefits were paid, and (ii) the Industrial Injuries Fund, from which the Industrial Injuries Scheme benefits were paid. Neither fund was a mere book-keeping entry: each held assets, consisting of cash and United Kingdom government securities, to which contributions were added and from which benefits were paid out. However the assets held were not matched to the long-term liabilities, and the National Insurance Fund in particular has been maintained only at the levels needed to provide for current yearly payments and other outgoings.
10.	Under s. 94 Social Security Act 1973 the Industrial Injuries Fund (which by 1972 had accumulated surplus assets of some £400M: Cmnd. 5019 para. 357 cited in Ogus & Barendt, Law of Social Security 1978, p. 269) was wound up as a separate fund, and in 1975 all its assets and liabilities were transferred to the National Insurance Fund. Subsequently by s.16 Social Security Act 1990, the liabilities of the Industrial Injuries Scheme were removed from the National Insurance Fund in its turn, and with effect from 1 April 1990 they are counted as unfunded government expenditure on social security in the same way as (for example) non-contributory disability benefits. 
11.	The reason behind this last change, as stated in the written submissions of the solicitor to the Secretary of State before me, was a fall in the assets of the National Insurance Fund attributable to rebates paid out of it to induce people to buy personal pensions. Liability for these rebates was newly imposed on the Fund by the Act of 1986.
Measures to curtail REA
12.	As noted above the government eliminated REA altogether for accidents and diseases sustained from 1 October 1990. In addition, a succession of legislative measures after 1986 attempted to eliminate or cut it down for people no longer of working age, for whom the government considered any comparison of  “earnings” artificial. 
13.	The method chosen was to impose cut-off or limiting conditions by reference to the unequal ages used by the statutory old-age pension scheme. (The provisions of that scheme are now set out in Part II Social Security Contributions and Benefits Act 1992.)  
14.	The Industrial Injuries Scheme had never previously contained such conditions. Since 1948 when the two schemes had begun, the practice (following the pattern of the earlier workmen’s compensation schemes the Industrial Injuries Scheme had replaced: see Commissioners’ decision R(I)14/62 paras. 9-11) had been for the earnings-related additional benefits to remain payable notwithstanding any cessation of actual work or earnings, and notwithstanding the attainment of pension age and the start of the statutory old-age pension; so that both benefits had been payable concurrently in full.
The national law provisions
15.	The provisions that impose the unequal age conditions are, so far as relevant:
Primary legislation: Schedule 7 Social Security Contributions and Benefits Act 1992, paragraphs 12 and 13:
“12.-(1) A person who on 10 April 1988 or 9 April 1989 satisfies the conditions -
(a)	that he has attained pensionable age;
(b)	that he has retired from regular employment; and 
(c)	that he is entitled to reduced earnings allowance, 
shall be entitled to that allowance for life.
(2) [Provides for the allowance under para. 12(1) to be fixed for life at the same weekly rate as the person was receiving on 10 April 1988 or 9 April 1989, depending on when he or she “retired” (for the meaning of this see below)]  ...
13.-(1) Subject to the provisions of this Part of this Schedule, a person who - 
(a)	has attained pensionable age; and 
(b)	gives up [before 1 October 1989 “retires from”]  regular employment on or after 10 April 1989; and 
(c)	was entitled to reduced earnings allowance ... on the day immediately before he gave up [before 1 October 1989 “retired from”] such employment,
shall cease to be entitled to reduced earnings allowance as from the day on which he gives up [before 1 October 1989 “retires from”]  regular employment.
(2)	If the day before a person ceases under sub-paragraph (1) above to be entitled to reduced earnings allowance he is entitled to the allowance ... at a weekly rate ... not less than £2, he shall be entitled to a benefit, to be known as “retirement allowance”.
(3)	Retirement allowance shall be payable to him ... for life.
(4)	... the weekly rate of a beneficiary’s retirement allowance shall be - 
(a)	25 per cent of the weekly rate at which he was last entitled to reduced earnings allowance; or 
(b)	10 per cent of the maximum rate of a disablement pension,
whichever is the less.  ...
(8)	Regulations may - 
(a)	make provision with respect to the meaning of “regular employment” for the purposes of this paragraph; and 
(b)	prescribe circumstances in which, and periods for which, a person is or is not to be regarded for those purposes as having given up such employment.  ...”
Secondary legislation: Social Security (Industrial Injuries) (Regular Employment) Regulations 1990 SI No. 256 (as amended from 24 March 1996) regulation 3:
“3. Unless he is entitled to reduced earnings allowance for life by virtue of paragraph 12(1) of Schedule 7 to the Social Security Contributions and Benefits Act 1992, a person who has attained pensionable age shall be regarded as having given up regular employment at the start of the first week in which he is not in regular employment after the later of - 
(a)	the week during which this regulation comes into force; or
(b)	the week during which he attains pensionable age.”
Effect of unequal age conditions on benefit rates
16.	The normal REA carries annual cost-of-living increases. Its top weekly rate is at present about £40. The top rate of retirement allowance under para. 13 is consequently about £10: this also carries cost-of-living increases. The fixed REA under paragraph 12 carries no increases: its top weekly rate remains frozen at about £27, the rate in 1989.
Special meanings of “pensionable age”, “retire”, and “gives up” in these provisions
17.	“Pensionable age” (in all of the above provisions) bears the same meaning as it has for the old-age pension: for men 65; for women 60 until 1996, then tapering up to eventual equality at 65 in 2020 (s.122(1) Social Security Contributions and Benefits Act 1992 as amended by the Pensions Act 1995).
18.	“Retires from regular employment” (in Schedule 7 paragraph 12(1)(b) above, and also paragraph 13(1) in its original form from 10 April to 30 September 1989) bore the same special meaning as it did in the old-age pension scheme prior to 1 October 1989. A person who had ceased normal working could opt when to “retire” and start drawing pension, at any time in the five years after attaining the pensionable age of 65/60. Anyone who had not so opted before the end of the five years was deemed to “retire” at 70 if a man or 65 if a woman, whether or not still working.
19.	“Gives up” in paragraph 13(1)(b) as in force from 1 October 1989 was initially left undefined. For people over pensionable age but not in fact working (so that they had no work to give up), the words were not given a meaning capable of terminating their continuing entitlement to REA until 24 March 1996, when regulation 3 as set out above came into effect. Consequently, many such people continued to be entitled to the full REA in the period 1989-1996, neither frozen under para.12 nor cut off under para. 13.
Practical effects of the national law
20.	The practical effect of the national provisions is summarised in the table set out on the following page. 
(For completeness, the table refers to certain changes that have also taken place in the meaning of “regular employment”: these can affect the date at which the cut-off conditions operate, but are not detailed further as they raise no fresh issues of principle on equal treatment. 
In addition, it should be pointed out that some aspects of the national law as stated here are due to be considered by the Court of Appeal in other proceedings in June 1998: however the outcome is unlikely to remove the need for this reference.)

Table: the position under national law
I: Frozen rate REA for life under para. 12 Sch 7 SSCBA 1992
applies to all REA recipients who before 10 April 1989 had reached
either
age 70 (if a man) or 65 (if a woman);  
or
the date of retirement fixed by a notice,  at age 65+ (man) or 60+ (woman);
but to nobody else.
II: For all other REA recipients
REA stops, and Retirement Allowance for life begins* 
on whichever first happens of
(a)	reaching 
age 70 (if a man) or  65 (if a woman), 
or 
the date of retirement fixed by a notice, at age 65+ (man) or 60+ (woman) 
on any date from 10 April 1989 to 30 September 1989;
(b)	giving up (in the ordinary sense) 
	regular employment (in the ordinary sense)  
		if engaged in it immediately before then, 
		at or after age 65 (if a man) or 60 (if a woman)
on any date from 1 October 1989 to 31 March 1990;
(c)	giving up (in the ordinary sense) 
	regular employment (10-hour average in the original 1990 regulations)
			if engaged in it immediately before then,
at or after age 65 (if a man) or 60 (if a woman)
on any date from 1 April 1990 to 23 March 1996;
(d)	failing any of the above, the first day of any week after 24 March 1996 
when the recipient is 
over age 65 (man), or over 60 or later pension age under PA 1995 (woman) 
and
not in regular employment (10-hour average as revised by 1996 regulations).
[Notes:  *	(i)	no retirement allowance is payable where REA was less than £2;
	(ii)	in cases II(b)-(d), there is no automatic cut-off at 70/65;
	(iii)	all cases involve potential sex discrimination]
These five appeals, and the questions
21.	These five appeals have been selected as test cases to illustrate the effects of the unequal age conditions, and the questions arising in relation to Directive 79/7/EEC on the implementation of the principle of equal treatment in matters of social security.
22.	It is not disputed that:
(a)	the Industrial Injuries Scheme is a statutory occupational accident and disease scheme within the material scope of the Directive; and 
(b)	each of the five claimants is a former worker within the Directive’s personal scope and entitled to assert a claim based on its direct effect so far as applicable.
23.	Each claimant asserts that the conditions described above discriminate against him or her unlawfully contrary to the provisions of Article 4 of the Directive that 
“The principle of equal treatment means that there shall be no discrimination whatsoever on ground of sex ... in particular as concerns ... the calculation of benefits ... and the conditions governing the duration and retention of title to benefits.” 
24.	The main issue (raised by questions I and II below) is whether those conditions are, as contended by the adjudication officers, within Article 7 by which the Directive is stated to be without prejudice to the right of Member States to exclude from its scope: “(a) the determination of pensionable age for the purposes of granting old-age and retirement pensions and the possible consequences thereof for other benefits”.
25.	The subsidiary issues (raised in question III) concern the principles governing the direct application of Article 4 and arise only if the Article 7 exclusion does not apply.

Nature of the questions: main issue (Questions I and II)
26.	On the main issue, it is apparent from the information before me (and the adjudication officers so concede) that the imposition after 1986 of unequal age conditions on REA for the first time was not necessary to maintain the financial equilibrium or coherence (insofar as that word is to be understood in a financial sense) of the UK social security schemes. 
27.	It is also apparent (and on the information before me I so decide as a fact) that such imposition was not necessary to enable the United Kingdom to retain the different pension ages under its old-age pension scheme. That difference had co-existed with the Industrial Injuries Scheme as described in para. 14 above for nearly 40 years from 1948 without it, and REA could simply have been left as it was, or a non-discriminatory cut-off age adopted, without upsetting the pension system as it had always operated.
28.	The real question therefore is the more difficult one of whether a government which considers it a costly anomaly to go on paying a benefit such as REA to people too old to work is permitted to impose a new cut-off at unequal ages, claiming the benefit of the exclusion in Article 7 for the “possible consequences for other benefits” having regard to what was said in the Court’s judgment in Graham, on the ground that the ages selected are the same as those for the pension, and (as contended before me on behalf of the adjudication officers) the government takes the view as a matter of policy that the income-replacement functions of REA should be performed after pension age by the pension, plus the very much smaller “retirement allowance”, instead.
Subsidiary issues (Question III)
29.	Question III is concerned with the application of the principle of direct effect and with the requirements of transparency of equal treatment (referred to in the Court’s judgments in Cases 109-88 Danfoss [1989] ECR 3220, para. 12 and C-262/88 Barber  [1990] ECR I-1889, para. 35) in circumstances where the balance of advantage between men and women may vary between different weeks or may be affected by options. The nature of the issues can be most easily understood by reference to the facts of the third, fourth and fifth cases set out below.
The facts
(1)	In Case CI/16608/1996 Hepple, the claimant is a lady born on 15 April 1933 who contracted an occupational disease and was awarded REA from 27 January 1987. Under Sch. 7 para. 13 cited above her benefit was cut to retirement allowance from 31 March 1996 as she was then over 60 and not working. A social security appeal tribunal, considering itself bound to do so by Graham, confirmed this. She appeals to me on the ground that Thomas should have been applied, and the cut not imposed until she attained the male pension age of 65 on 15 April 1998.
(2)	In Case CI/537/1997 Stec, the claimant is a lady born on 13 April 1933 who suffered an accident at work and was awarded REA from 24 January 1990. Under Sch. 7 para. 13 her benefit was cut to retirement allowance from 31 March 1996 as she was then over 60 and not working. A social security appeal tribunal, considering itself bound to do so by Thomas, reversed this and awarded her the unreduced benefit until she attained 65 on 13 April 1998. The adjudication officer appeals to me on the ground that Graham should have been applied, and the cut imposed from 31 March 1996.
(3)	In Case CI/1847/1997 Lunn, the claimant is a man born on 19 May 1923 who suffered an accident at work and was awarded SHA, later converted to REA, from 12 May 1974. He began to draw his statutory old age pension from 19 May 1993, at age 70.  His REA benefit was cut to retirement allowance from 31 March 1996 as he was then over 65 and not working, and this was confirmed by a social security appeal tribunal applying Sch. 7 para. 13.  On appeal to me he claims that he should instead be given the frozen rate REA under Sch. 7 para. 12 for the rest of his life because a woman of his age would have got this from 19 May 1988. He does not however agree that the cost-of-living increases he (unlike such a woman) has had in the years from 1988-1996 should be brought into account.
(4)	In Case CI/1896/1997 Kimber, the claimant is a man born on 30 September 1924 who suffered an accident at work and was awarded SHA, later converted to REA, from 1982.  He began to draw his statutory old-age pension from 30 September 1994 at age 70. His REA benefit was cut to retirement allowance from 31 March 1996 as he was then over 65 and not working.  A social security appeal tribunal, considering itself bound to do so by Thomas, reversed this and awarded him continuing REA at the full rate on the ground that a woman would have received this. The adjudication officer appeals to me on the ground that Graham should have been applied and the cut imposed from 31 March 1996.  In fact, a woman born on 30 September 1924 who had not opted to receive her pension earlier would have already had her REA cut to retirement allowance from 30 September 1989 under Sch. 7 para. 13 as then in force; only if she had opted to start pension between 30 September 1988 and 9 April 1989 (as she could have done, but the claimant could not) would she have received the frozen rate REA under para. 12 for life.  He therefore contends that he has been unlawfully discriminated against by not being allowed such an option, though he did not seek to assert a right to one at the time.
(5)	In Case CI/2887/1995 Spencer, the claimant is a lady born on 11 December 1926 who suffered an accident at work and was awarded SHA, later converted to REA, from 1967. She exercised her option to start drawing her pension from 23 December 1986 when she was 60.  An adjudication officer determined that in consequence she was entitled only to the frozen rate of REA under Sch. 7 para. 12 from 1988.  A social security appeal tribunal, considering itself bound to do so by Thomas, reversed this and awarded her the full rate REA, including cost of living increases, which a man born on 11 December 1926 (who could not have exercised such an option so as to obtain frozen rate REA for life) would have received down to 31 March 1996.  The adjudication officer appeals to me on the ground that Graham should have been applied, and only the frozen rate awarded.  The claimant asserts that the Directive entitles her to the full benefit a man would have got down to 31 March 1996, but does not agree that she should then be cut down to retirement allowance as he would be.
Agreed statement by the parties
30.	An agreed statement by the parties, in which the facts and opposing contentions are set out in more detail for the assistance of the Court, is annexed as a separate document at the end of this reference.
Significance
31.	According to figures helpfully provided to me by the solicitor to the Secretary of State for Social Security, there are some 19,000 female REA claimants born after 31 March 1931 who, like the claimants in the first two cases, are concerned to obtain the full rate of REA for up to five additional years before being cut to retirement allowance and are thus directly affected by the main issue in questions I and II.
32.	The subsidiary issues in question III would principally affect male REA claimants born before the end of March 1929 who (according to the figures provided) numbered over 32,000 at 31 March 1996.  The cash significance of these issues for them is however more difficult to assess, because of the complexity of the questions involved.
Questions referred for a preliminary ruling under Article 177
33.	In the circumstances set out above, I refer these cases to the Court of Justice with the request for a preliminary ruling under Article 177 EC on the following 

QUESTIONS
I:	 Does Article 7 of Council Directive 79/7/EEC permit a member State to impose unequal age conditions linked to the different pension ages for men and women under its statutory old-age pension scheme, on entitlement to a benefit having the characteristics of Reduced Earnings Allowance under a statutory occupational accident and disease scheme, so as to produce different weekly cash payments under that scheme for men and women in otherwise similar circumstances, in particular where the inequality:
(a)	is not necessary for any financial reason connected with either scheme; and
(b)	never having been imposed before, is imposed for the first time many years after the inception of the two schemes and also after 23 December 1984, the latest date for the Directive to be given full effect under Article 8?
II:	If the answer to Question I is Yes, what are the considerations that determine whether unequal age conditions such as those imposed in Great Britain for Reduced Earnings Allowance from 1988-89 onwards are necessary to ensure coherence between schemes or otherwise fall within the permitted exclusion in Article 7?  
III:	If those unequal age conditions are not within the permitted exclusion in Article 7, then does the doctrine of direct effect require the national court (in the absence of national legislation to comply with the Directive) to rectify the inequality by awarding an additional payment to each individual concerned in any week when the payment prescribed under the occupational accident and disease scheme for him or her is lower than for a person of the other sex but in otherwise similar circumstances (“the comparator”), without regard to 
(a)	any converse advantage in other weeks when, for the same individual, a higher payment is prescribed than for the comparator; and/or 
(b)	the existence or exercise of sex-differentiated options under the pension scheme to choose the pension starting age, the effect of which in conjunction with the unequal conditions under the occupational accident and disease scheme may be to cause altered (and unequal) weekly payments under that scheme: in some weeks to the advantage of the individual, in others to the comparator?
Or should some account be taken of such matters, and if so what are the principles to be applied in relation to them in giving direct effect to Article 4?

Date: 8 May 2000 	(signed) Mr. P.L. Howell QC
	Commissioner

The decision of the European Court of Justice follows

DECISION OF THE EUROPEAN COURT OF JUSTICE

R. Drabble QC, instructed by R. Poynter, Solicitor, for Ms. Hepple, Ms. Stec, Ms. Spencer and Mr. Lunn.
H. Mountfield, Barrister, instructed by B. McKenna, Solicitor, for Mr. Kimber.
C. Vajda QC, and J.E. Collins, Assistant Treasury Solicitor, agent, for the United Kingdom Government.
M. Wolfcarius, of its Legal Service, and N. Yerrell, a national civil servant on secondment to that service, agents, for the Commission of the European Communities.

The Opinion of the Advocate General was delivered on 12 October 1999, and is reported at [2000] All ER (EC) 515.

Judgment
1.	By decision of 8 May 1998, received at the Court on 22 May 1998, the Social Security Commissioner referred to the Court for a preliminary ruling under Article 177 of the EC Treaty (now Article 234 EC) three questions on the interpretation of Article 7(1)(a) of Council Directive 79/7/EEC of 19 December 1978 on the progressive implementation of the principle of equal treatment for men and women in matters of social security (OJ 1979 L 6 p. 24, hereinafter “the Directive”). 
2.	Those questions were raised in five actions between Ms. Hepple and four other persons and the adjudication officer concerning the latter’s refusal to grant them reduced earnings allowance (hereinafter “REA”). 
The Community legislation
3.	Article 4(1) of the Directive prohibits all discrimination on grounds of sex, in particular as concerns the calculation of benefits. 
4.	Such discrimination can be justified only under Article 7(1)(a) of the Directive which provides that the Directive is to be without prejudice to the right of Member States to exclude from its scope the determination of pensionable age for the purposes of granting old-age and retirement pensions and the possible consequences thereof for other benefits. 
5.	Article 7(2) of the Directive provides: 
Member States shall periodically examine matters excluded under paragraph 1 in order to ascertain, in the light of social developments in the matter concerned, whether there is justification for maintaining the exclusions concerned.
6.	Article 8 of the Directive provides: 
1.	Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive within six years of its notification. They shall immediately inform the Commission thereof.
2.	Member States shall communicate to the Commission the text of laws, regulations and administrative provisions which they adopt in the field covered by this Directive, including measures adopted pursuant to Article 7(2).
They shall inform the Commission of their reasons for maintaining any existing provisions on the matters referred to in Article 7(1) and of the possibilities for reviewing them at a later date.
7.	Article 9 of the Directive provides: 
Within seven years of notification of this Directive, Member States shall forward all information necessary to the Commission to enable it to draw up a report on the application of this Directive for submission to the Council and to propose such further measures as may be required for the implementation of the principle of equal treatment.
The national legislation
8.	In all five cases the main proceedings relate to the grant to the relevant claimants of REA, a weekly cash benefit payable to employees or former employees who have suffered a reduction in earnings following an accident at work or occupational disease. Its purpose is to compensate for an impairment of earning capacity. 
9.	The scheme, instituted in 1948 as “the Industrial Injuries Scheme”, provided for a special hardship allowance, which was recast and renamed REA by the Social Security Act 1986. The relevant provisions are now contained in Part V of the Social Security Contributions and Benefits Act 1992. 
10.	REA is calculated on the basis of a comparison between earnings in the occupation which the claimant has been prevented from continuing as a result of suffering an accident at work or occupational disease and those in any alternative occupation still considered suitable despite the disablement. The maximum amount of the allowance is about UKL 40, including cost-of-living increases added annually. 
11.	There are no minimum contribution conditions for payment of REA, although employed earners’ and employers’ national insurance contributions had included a proportion attributable to the cost of the whole scheme of protection in respect of accidents at work and occupational diseases. 
12.	From 1986, a succession of legislative amendments affecting REA were adopted to reduce the number of persons entitled to receive it. Previously, REA had remained payable notwithstanding attainment of pensionable age and inception of receipt of the statutory old-age pension, so that both benefits had been payable concurrently in full. The succession of legislative amendments adopted after 1986 sought to limit the payment of REA to persons who were still of normal working age. 
13.	The last significant change consisted in the introduction of a “retirement allowance” (hereinafter RA) to replace REA for persons who had attained pensionable age and had ceased regular employment. The rate of that allowance is 25% of the last weekly amount of REA to which the relevant recipient was entitled. Its purpose is to compensate for the reduction in pension entitlement resulting from a decrease in income following an accident at work or occupational disease. 
14.	It should also be noted that the pensionable age in the United Kingdom is 65 years for men and 60 for women.  Until 1 October 1989 it was not possible to claim a retirement pension unless pensionable age had been attained, the conditions regarding contributions had been fulfilled and the person concerned “had retired from regular employment.” 
15.	The rules on eligibility for retirement pensions were changed with effect from 1 October 1989 so that a retirement pension is now paid to persons over pensionable age, even if they have not retired from regular employment. 
The main proceedings and the questions referred to the Court
16.	Ms. Hepple, Ms. Stec, Ms. Spencer, Mr. Kimber and Mr. Lunn take exception, for diverse reasons, to the effects on them of the successive legislative amendments made to the scheme concerned. 
17.	They claim, essentially, that the amount of the allowance received by them since attaining retirement age - REA or RA, as the case may be - is of a lower amount than that received by a person of the opposite sex in comparable circumstances. 
18.	Entertaining doubts as to the compatibility of the national legislation with the Directive, the Social Security Commissioner stayed proceedings pending a preliminary ruling by the Court of Justice on the following three questions: 
1.	Does Article 7 of Council Directive 79/7/EEC permit a Member State to impose unequal age conditions linked to the different pension ages for men and women under its statutory old-age pension scheme, on entitlement to a benefit having the characteristics of Reduced Earnings Allowance under a statutory occupational accident and disease scheme, so as to produce different weekly cash payments under that scheme for men and women in otherwise similar circumstances, in particular where the inequality: 
(a)	is not necessary for any financial reason connected with either scheme; and 
(b)	never having been imposed before, is imposed for the first time many years after the inception of the two schemes and also after 23 December 1984, the latest date for the Directive to be given full effect until Article 8? 
2.	If the answer to Question 1 is Yes, what are the considerations that determine whether unequal age conditions such as those imposed in Great Britain for Reduced Earnings Allowance from 1988 to 1989 onwards are necessary to ensure coherence between schemes or otherwise fall within the permitted exclusion in Article 7? 
3.	If those unequal age conditions are not within the permitted exclusion in Article 7, then does the doctrine of direct effect require the national court (in the absence of national legislation to comply with the Directive) to rectify the inequality by awarding an additional payment to each individual concerned in any week when the payment prescribed under the occupational accident and disease scheme for him or her is lower than for a person of the other sex but in otherwise similar circumstances (the comparator), without regard to 
(a)	any converse advantage in other weeks when, for the same individual, a higher payment is prescribed than for the comparator; and/or 
(b)	the existence or exercise of sex-differentiated options under the pension scheme to choose the pension starting age, the effect of which in conjunction with the unequal conditions under the occupational accident and disease scheme may be to cause altered (and unequal) weekly payments under that scheme: in some weeks to the advantage of the individual, in others to the comparator? 
Or, should some account be taken of such matters, and if so what are the principles to be applied in relation to them in giving direct effect to Article 4? 
The first two questions
19.	By its first two questions, which it is appropriate to consider together, the national court seeks essentially to ascertain whether the derogation for which Article 7(1)(a) of the Directive provides is to be interpreted as applying to a benefit such as REA, which was introduced into national legislation after expiry of the period prescribed for transposition of the Directive and is subject to age conditions which differ according to sex. 
20.	First, the benefit at issue in the main proceedings, which consists of an allowance for employees whose pay has decreased following an accident at work or occupational disease, falls within the scope of the Directive. Moreover, that benefit does not constitute an old-age pension but might be classifiable, under Article 7(1)(a) of the Directive, as a benefit for which the determination of retirement age might have repercussions. 
21.	Accordingly, it is necessary to consider whether the Directive prohibits the introduction by Member States which have determined different retirement ages according to sex of further discriminatory measures after expiry of the period prescribed for transposition of the Directive. 
22.	Ms. Hepple, Ms. Stec and Ms. Spencer, Mr. Lunn and Mr. Kimber, and the Commission contend that such use of the derogation for which Article 7(1)(a) of the Directive provides is contrary to the purpose of the Directive, which is to ensure progressive implementation of the principle of equal treatment for men and women in matters of social security. They further contend that, in paragraph 9 of its judgment in Case C-328/91 Secretary of State for Social Security v. Thomas and Others [1993] ECR I-1247, the Court held that, by virtue of Article 7(1)(a) of the Directive, the Community legislature intended to allow Member States to maintain temporarily the advantages accorded to women with respect to retirement in order to enable them progressively to adapt their pension systems. 
23.	In that connection, it should be made clear that the temporary maintenance of different retirement ages according to sex may necessitate the subsequent adoption, after expiry of the period prescribed for transposition of the Directive, of measures indissociable from that derogation and also amendments to such measures. 
24.	To prohibit a Member State which has set different retirement ages for men and women from adopting or subsequently amending, after expiry of the period prescribed for transposition of the Directive, measures linked to that age difference would be tantamount to depriving the derogation for which Article 7(1)(a) of the Directive provides of its practical effect. 
25.	According to settled case-law, where, pursuant to Article 7(1)(a) of the Directive, a Member State prescribes different pensionable ages for men and women for the purposes of granting old-age and retirement pensions, the scope of the permitted derogation, defined by the words “possible consequences thereof for other benefits”, contained in Article 7(1)(a), is limited to the forms of discrimination existing under other benefit schemes which are necessarily and objectively linked to the difference in pensionable age (see, in particular, Thomas and Others, cited above, paragraph 20, Case C-92/94 Secretary of State for Social Security and Chief Adjudication Officer v. Graham and Others [1995] ECR I-2521, paragraph 11, and Case C-139/95 Balestra v. INPS [1997] ECR I-549, paragraph 33). 
26.	That will be the position where such forms of discrimination are objectively necessary in order to avoid disturbing the financial equilibrium of the social security system or to ensure coherence between the retirement pension scheme and other benefit schemes (see Thomas and Others, paragraph 12, Graham and Others, paragraph 12, and Balestra, paragraph 35). 
27.	As regards, first, the requirement of preserving financial equilibrium of the social security system, it must be borne in mind that the Court has already held that the grant of benefits under non-contributory schemes to persons in respect of whom certain risks have materialised, regardless of the entitlement of such persons to an old-age pension by virtue of contribution periods completed by them, has no direct influence on the financial equilibrium of contributory pension schemes (see Thomas and Others, paragraph 14). 
28.	It must also be noted that in none of the observations submitted to the Court has it been argued that considerations of financial equilibrium might be applicable to non-contributory benefits, such as those at issue in this case, and the United Kingdom has even expressly excluded that possibility. 
29.	In those circumstances, it must be held that removal of the discrimination at issue in the main proceedings would have no effect on the financial equilibrium of the social security system of the United Kingdom as a whole. 
30.	As regards, second, coherence between the retirement pension scheme and other benefit schemes, it must be considered whether it is objectively necessary for different age conditions based on sex to apply to the benefit at issue in this case. 
31.	In that respect, the principal aim of the successive legislative amendments mentioned in paragraphs 12 and 13 of this judgment was to discontinue payment of REA - an allowance designed to compensate for an impairment of earning capacity following an accident at work or occupational disease - to persons no longer of working age by imposing conditions based on the statutory retirement age. 
32.	Thus, as a result of those legislative amendments, there is coherence between REA, which is designed to compensate for a decrease in earnings, and the old-age pension scheme. It follows that maintenance of the rules at issue in the main proceedings is objectively necessary to preserve such coherence. 
33.	That conclusion is not invalidated by the fact that REA is replaced, when the beneficiary reaches retirement age and stops working, by RA, the rate of which is 25% of REA, since RA is designed to compensate for the reduction in pension entitlement resulting from a decrease in earnings following an accident at work or occupational disease. 
34.	It follows that discrimination of the kind at issue in the main proceedings is objectively and necessarily linked to the difference between the retirement age for men and that for women, so that it is covered by the derogation for which Article 7(1)(a) of the Directive provides.
35.	The answer to the first two questions must therefore be that the derogation for which Article 7(1)(a) of the Directive provides is to be interpreted as applying to a benefit, such as REA, which was introduced into national legislation after expiry of the period prescribed for transposition of the Directive and is subject to age conditions which differ according to sex. 
The third question
36.	In view of the answer given to the first two questions, it is unnecessary to answer the third. 
Costs
37.	The costs incurred by the United Kingdom Government and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. 

On those grounds,

THE COURT,
in answer to the questions referred to it by the Social Security Commissioner by decision of 8 May 1998, hereby rules:
The derogation provided for in Article 7(1)(a) of Council Directive 79/7/EEC of 19 December 1978 on the progressive implementation of the principle of equal treatment for men and women in matters of social security must be interpreted as applying to a benefit, such as the reduced earnings allowance at issue in the main proceedings, which was introduced into national legislation after expiry of the period prescribed for transposition of the Directive and is subject to age conditions which differ according to sex.