Survivor pensions O
n 18 February 2014, the Employment Appeal Tribunal (EAT) ruled that pension schemes can continue to restrict the entitlement of a surviving civil partner to a spouse’s pension to service which has built up with effect from 5 December 2005. Although this amounts to less favourable treatment of same-sex partners, in comparison with people who are married, and is therefore a form of direct discrimination, the EAT ruled that an exception in the Equality Act 2010 which permits such a restriction is in fact compatible with European Union (EU) law. As a result, therefore, this restriction can continue to be relied on by both pension trustees and employers in the provision of death benefits to surviving civil partners.
Civil partners, non-discrimination and pensions
Same-sex couples have been able to enter into civil partnerships since 5 December 2005. Since then, less favourable treatment of same-sex partners, in comparison with people who are married, has been a form of direct discrimination because of sexual orientation. However, an exception was built in to the equality legislation which states that it is not unlawful to restrict civil partners’ access to benefits that accrued before 5 December 2005 or are payable only in respect of service before that date. Many UK pension schemes have relied upon this exception to restrict the entitlement of surviving civil partners to a spouse’s pensions under pension plans to service built up with effect from 5 December 2005. It is also the case that surviving civil
partners are entitled to receive pension benefits which would have been paid to a surviving spouse in respect of any contracted-out rights which were built up from April 1988 onwards.
34 PayrollProfessional Walker v Innospec
In this case, the claimant challenged the practice of restricting surviving civil partners’ entitlements to spouses’ pensions in this way.
Mr Walker claimed that this difference in treatment between married couples and civil partners was unlawful discrimination and that the exception under the Equality Act 2010 was incompatible with EU law and should be disapplied. An Employment Tribunal agreed with Mr Walker and, in order to make the Equality Act exception compatible with EU law, they interpreted it in such a way that it would no longer apply to civil partners.
... THE EQUALITY ACT EXCEPTION WAS COMPATIBLE WITH EU LAW..
However, the EAT has now overturned the Employment Tribunal’s decision on this issue. Finding in favour of Innospec Ltd and the trustees of its pension plan, the EAT held that the Equality Act exception was compatible with EU law. It was also held that, even if the exception had not been permitted by EU law, the Equality Act could not be interpreted in a way that would give effect to EU law as this went against the clear intention of Parliament and crossed the line between interpreting legislation (which is for the courts to do) and making legislation (which is for Parliament). The outcome in this appeal will be welcomed by employers and pension trustees. It is clear that when Parliament legislated on this matter, it was fully aware of the need to comply with the relevant
The EAT has recently upheld UK law on survivors’ pension benefits for civil partners. Stuart Earle, Pension partner at Eversheds LLP, explains the implications
European Directive and protect the rights of civil partners and it did so. At the same time, by including in the Equality Act the exception relied on in this case, Parliament took on board the very significant practical problems that would arise from retrospectively imposing additional funding pressures on pension schemes, particularly final salary schemes.
What does this mean for pension plans?
Subject to any further appeals in this case, the EAT’s decision means that pension plans can continue to restrict the entitlement of surviving civil partners to a spouse’s pension to service on and after 5 December 2005 if they want to. Significantly the same will apply to surviving same sex spouses when same sex marriages become possible from March this year.
Further review It is important to bear in mind, however, that the Secretary of State is currently undertaking a review of the difference in treatment of civil partners and same sex married couples under occupational pension schemes. As part of this he is required to consider whether to change the law to eliminate or reduce that difference in treatment. If he considers it necessary to change the law he has the power to do so under the Marriage (Same Sex Couples) Act 2013. Therefore, the EAT’s judgment may not be the final word on the subject and trustees and employers need to be alert to further developments.
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