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Equality Rules

14/07/2017

The much anticipated decision in the case involving equal rights in pension schemes for civil partners and same sex spouses was handed down by the Supreme Court on Wednesday.  The decision represents a victory for equal rights with the Supreme Court ruling in favour of Mr Walker against his former employer, Innospec Limited.  Pension schemes will now need to review their Rules and any pensions paid to same sex survivors to ensure they are in line with this decision.

Background

Mr Walker was a member of Innospec's contributory pension scheme during his time in employment with the company (1980 to 2003).  Mr Walker is now married to his male partner with whom he has been living since 1993.  The complaint arose after Innospec confirmed to Mr Walker that, in the event of his death, a spouse's pension on the same terms as would be paid to an opposite sex married couple would not be paid.  In monetary terms this meant that instead of an annual spouse's pension of £45,700 being payable, an annual spouse's pension of just £1,000 would be paid (being the spouse's GMP).

In justification, Innospec relied on the exception in the Equality Act 2010 which permits pension schemes to limit same sex survivors' benefits to pension which accrued after 5 December 2005. 

This exception was inserted as part of the government's attempt to enact into UK law the EU directive which prohibits discrimination by employers on various grounds including sexual orientation.

Supreme Court's Decision

The five judges hearing the case unanimously allowed Mr Walker's appeal.  They ruled that the exception limiting equal treatment for civil partners and same sex spouses to periods after 5 December 2005 is incompatible with EU law and must be disapplied.  The ruling means that the exception should never have applied and is unlawful.  In addition the Supreme Court ruled that Mr Walker's husband must be entitled, in the event of his death, to a spouse's pension which takes into account Mr Walker's pensionable service prior to 5 December 2005.

Actions for trustees

Check if your scheme rules entitle civil partners and same sex spouses to a pension based on full pensionable service.  If they do, given the press attention the case has received, this is something you may wish to highlight in your next member communication.  If they don't, there are several actions you will need to take:

  • ensure all future civil partner and same sex spouse pensions are based on full service,

  • recalculate pensions already paid or in payment to same sex spouses or civil partners where the member had pensionable service before 5 December 2005 and pay any arrears.  You should consider whether interest should be paid on these arrears,

  • review any annuity or buy-in contracts to see if these provide for fully equal pensions,

  • consider if there are any cash flow or funding implications.  Most schemes assume most of their members are married, so funding is unlikely to be an issue, and

  • consider if any rules changes would be desirable to reflect the decision.

Practical steps for employers

The obligation to pay equal pensions is one which falls on pension scheme trustees.  However, you may wish to communicate with your employees about the implications of the case for them.

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