Sex equality in pensions remains elusive: Backdating of new rules has annoyed everyone involved in the debate, reports Vivien Goldsmith

THE WEIGHTY judgments from Europe this week about the equal treatment of men and women in company pension schemes have brought into focus the confusion surrounding the subject.

First, you have to know whether your company has a pension scheme and, if so, what type it is.

There are two forms of company pensions - one racks up benefits in the form of fractions of your salary when you leave, while the other gets real cash put into a pot and grows (or shrinks) according to the investment climate.

A final salary scheme will typically tot up at the rate of one-sixtieth of your salary when you leave for each year of service. So to get the maximum two-thirds pension allowed under tax law you would have to work for 40 years.

At any point you can stop paying in and have the rights translated into a cash sum that can be transferred to a personal pension or another employer's scheme. The sex equality case, originally brought by a man, rests on the fact that many schemes let women retire at 60 on full pensions while men had to work on for five years.

When a worker chooses to retire early he or she will lose about 4 per cent of pension for each year short of normal retirement age.

The case of women workers at Avdel Systems, of Welwyn Garden City, Herts, arose because women were made worse off when the retirement age was raised to 65 for all on 1 July 1991 to comply with a European judgment in May 1990.

This week's ruling is that the disadvantaged men must have their terms improved to match the womens'in the period before a common retirement age was set.

But companies were free to pick any age to make the sexes equal and women could legally have their contracts changed to make them work a further five years to qualify for a full pension - or suffer a reduced pension if they retired at 60.

If the retirement age for women was moved from 60 to 65 half way through a woman's working life with a company, then if she retired aged 62.5, half her pension would be enhanced because she had postponed retirement, and half would be docked because of early retirement.

With the ruling that confirmed that part-time workers have the right to join a scheme if they can show an element of sex discrimination in their exclusion there is an element of back-dating that has angered employers. The catch for employees is that those in schemes where the workers have to pay something must make back payments to 1976. Employers will have to put in their share of contributions and any investment gains. Employers such as banks, having schemes without employee payments, fear a huge demand for this free ride.

When it comes to calculating transfer values and swapping the pension savings in a money purchase scheme into a stream of income to see you through old age, men and women will continue to be treated unequally.

This reflects the fact that women live longer, so it takes a larger lump sum to buy them the same monthly income.

(Photograph, table and graphs omitted)