Does equal marriage mean equal pension rights?
Want to read this article later?
Just tap MyLCN+ to save it to your account
Do same sex and heterosexual married couples have the same pension rights in occupational pension schemes?
Civil partnerships were created under the Civil Partnership Act 2004 which came into force on 5 December 2005. With effect from that date, it also became a requirement to treat civil partners the same as opposite sex married couples for many legal purposes. However, for the purposes of pensions provided by occupational pension schemes, this parity of treatment is generally* only legally required for pension benefits accrued from 5 December 2005 (the date when the act came into effect and due to an exception provided for in the Equality Act 2010). This treatment was extended to same sex married couples by the Marriage (Same Sex Couples) Act 2013.
This temporal limit has been challenged in the courts in the case of Walker v Innospec Limited and others. Here Walker, a male pensioner member was told by his pension scheme, the Innospec Pension Scheme, that his male civil partner (now his husband) would only be entitled to survivor's benefits based on Walker's pensionable service from 5 December 2005, as opposed to the whole of his pensionable service, which is – what his spouse would have received under the scheme had they been a heterosexual married couple. Walker's case was that because of this, he was being discriminated against on grounds of sexual orientation, contrary to both EU legislation and the Human Rights Act 1998, to the extent it incorporates the European Convention on Human Rights into UK law.
The most recent decision in this case in the Court of Appeal was decided against Walker, even though the effect of this decision is that Walker's husband would, in the event of Walker's death, only be entitled to a pension of £500 per annum from the scheme, whereas if Walker was married to a woman of the same age, she would be entitled to a pension of approximately £41,000 per annum – a significant difference.
While this decision may seem hard, it is important to highlight the fact that pension schemes are funded in advance of an individual's retirement, so Walker would have been accruing his pension benefit before there was any legal concept of same sex partnership. Therefore it would be difficult to penalise pension schemes on the grounds of discrimination, which legally did not exist at the time of accrual.
Walker started work with Innospec Limited and joined the scheme in 1980. In 2006 Walker entered into a civil partnership with his long-term male partner (and they later married). The scheme was amended in 2006 to reflect the legislation surrounding civil partnerships so that civil partners would be entitled to survivors' benefits in relation to only the member's post 5 December 2005 pensionable service. In contrast, for heterosexual marriages, under the scheme a widow/widower would be entitled to two-thirds of the member's pension based on all of the member's pensionable service.
Walker brought a claim against Innospec Limited and the trustees of the scheme for direct and indirect discrimination. He claimed that the section of the Equality Act 2010 which effectively allowed occupational pension schemes to provide benefits for civil partners only in respect of post 5 December 2005 pensionable service was contrary to the EU Framework Directive 2000/78/EC and general principles of EU law prohibiting discrimination on the grounds of sexual orientation in employment. At first instance, the Employment Tribunal held in Walker's favour. This was then appealed to the Employment Appeal Tribunal, which reversed the decision. Walker then appealed to the Court of Appeal.
The court recognised that the right to equal treatment on grounds of sexual orientation did not become a fundamental principle of EU law until the expiry date by which the Framework Directive had to be applied in UK law (3 December 2003). The question raised by this case was: once that right had been established, did it give Walker the right to the payment of a pension to his surviving husband based entirely on his pensionable service at an earlier period?
The court considered several EU cases and the principles surrounding whether or not the EU anti-discrimination law can have retrospective effect so as to apply to all of Walker's pensionable service. In short, it determined that EU legislation does not have retroactive effect unless certain conditions apply (eg, it is clear that the legislator intended such an effect). This is known as the 'no retroactivity principle' and meant that Walker's pension entitlement had to be judged by reference to the law in force at the time when it accrued. Walker retired on 3 March 2003 and ceased to accrue pension rights before the law effected by the directive came into effect. To change the character of those rights to include the right to payment of a pension to a same sex spouse would have given that change retroactive effect. Indeed, there could be no discrimination until civil partnerships were introduced in December 2005 because it was only then when a situation (ie, a registered partnership) comparable to a heterosexual marriage was introduced.
The court held that the exemption in the Equality Act 2010 was not incompatible with the Framework Directive and noted that while national courts must, if they can, interpret a national law to comply with a European directive, this power does not extend to law making, which is the task of Parliament. The court further noted that the exemption was expressly designed to prevent claims such as Walker's from being made, and so to interpret this law in any other way would be to make a new law which Parliament had already rejected.
Walker's appeal was therefore dismissed.
Lord Justice Underhill noted that Walker and his husband would find this conclusion hard to accept, which may be felt by couples in a similar situation. However, as the government review on survivorship benefits for same sex partners in occupational pension schemes (published June 2014) said, “The government will need to consider [the] costs and potential impact on pension schemes, along with the wider consequences of making retrospective changes to scheme rules. As this review demonstrates, these are complex issues and the government will have to consider these very carefully before making a decision on whether the law should be changed.” We understand that the government has said that it will make its decision on the review findings in due course, but that it is vital that the findings are “considered thoroughly” before doing so. It is likely that the government was also waiting for the outcome of the Walker case before considering its own response and may well be guided by the result, bearing in mind the potentially significant cost for UK occupational pension schemes of doing otherwise.
Stephanie Hinks is a second-year trainee solicitor at Taylor Wessing.
* The reference to benefits 'generally' being limited to those accrued from 5 December 2005 is because if a scheme is contracted-out, it must provide contracted-out benefits to a surviving civil partner by reference to any service from 6 April 1988. That date is when the contracting-out requirements first provided for a pension to a widower on a female member's death in respect of any contracted-out benefits earned going forwards. No specific question over the time limitation in relation to contracted-out benefits was raised in this case.