As UK Supreme Court rules that same-sex partners are entitled to same pension rights as heterosexuals, what actions do employers and trustees need to take?
- The Supreme Court has unanimously ruled that same sex couples should receive the same pension rights in respect of survivor benefits as those in heterosexual marriages.
- The Court decided that an exemption in the Equality Act 2010, which currently allows schemes to limit benefits for civil partners and same sex spouses to post 5 December 2005 pensionable service, is discriminatory and in breach of EU equality laws.
- Notwithstanding the UK’s decision to leave the EU, it seems unlikely that any post-Brexit government will look to reverse this decision. So, employers and trustees should be considering the implications for their schemes now.
Mr John Walker was a member of the Innospec Ltd private sector defined benefit pension scheme. He built up benefits from the beginning of his employment in 1980 until his early retirement in 2003.
Mr Walker entered into a civil partnership on 23 January 2006, after the law was changed on 5 December 2005 to permit same sex civil partnerships. He and his partner subsequently married once the law was changed again to permit same sex marriage.
Under the rules of his pension scheme, if Mr Walker died before his husband, his husband would be entitled to a pension of around £1,000 per annum. However, if Mr Walker had married a woman, she would have been entitled to a spouse’s pension of about £45,700 per annum. The discrepancy arose because, whilst The Equality Act 2010 makes it illegal to discriminate on the grounds of an individual’s civil or same sex partnership status, there is an exception for pension schemes. Until now, this exception has made it lawful to discriminate in respect of benefits accrued before the law introducing same sex civil partnerships was introduced - i.e. 5 December 2005 (*).
Mr Walker brought a case against his employer in 2011 alleging that his pension scheme’s practice breached EU anti-discrimination legislation. His case went all the way to the Supreme Court, which handed down its judgment on 12 July. The Court agreed with Mr Walker holding that the pension scheme exemption under The Equality Act 2010 was never valid and that, on his death, Mr Walker’s husband would be entitled to a full spouse’s pension.
(*) In practice, where schemes limit benefits for civil partners and same sex spouses in line with the minimum requirements under the Equality Act, members of public and private pension schemes are treated differently. This is illustrated in the table below, which splits same sex marriage and civil partnership as the latter was introduced under the Civil Partnership Act 2004 and the former under the Marriage (Same Sex Couples) Act 2013. The minimum pension requirements are the same.
In short, pension schemes must now provide equal benefits for opposite sex spouses, same sex spouses and civil partners.
Whilst many schemes have decided, voluntarily, to give same sex civil partners and same sex spouses the same benefits as heterosexual married couples, many more relied on the Equality Act exemption. The DWP, which opposed Mr Walker’s case alongside Innospec, argued that the costs involved in requiring pension schemes to equalise entitlements retrospectively would be £100 million for private sector schemes and a further £20m for public sector schemes.
Pension schemes that limit benefits for civil partners and same sex spouses, including those that closed before 5 December 2005, will need to take some action. The exact nature of that action will depend on the type of scheme (see the table below) and scheme provisions, but considerations include:
- Amendments to trust deed and rules and member communications.
- Re-calculations (with appropriate back payments) for spouse’s pensions that have already come into payment for civil partners and same sex spouses.
- Reviews of previous claims for such pensions that were rejected because the relevant pension scheme member had no post 5 December 2005 pensionable service.
- Schemes which have bought out benefits will need to ensure that they are fully discharged in respect of liabilities for civil partners and same sex spouses.
We hope you find this article of interest. For further information, contact your usual JLT Consultant or John Wilson at firstname.lastname@example.org.
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