Schemes may want to consider holding off adjusting their spousal benefits, after a tribunal overturned a previous ruling that deemed entitlements should take into account membership pre-dating the Civil Partnership Act 2004.
An earlier decision by the Employment Tribunal in the case of Mr Walker v Innospec Ltd found that a civil partner’s pension should not be restricted to the period after the act came into force.
But the Employment Appeal Tribunal last month overturned this verdict, ruling that the original restriction, which stated civil partners should only receive benefits from the introduction of the act, was compatible with EU law.
Counting the cost of equality
Law firm Wragge has estimated that the additional cost to schemes of equalising benefits could range anywhere from £88m to £3bn.
Debating the issue in parliament recently, Baroness Thornton expressed concern that the consultation may be overly influenced by the occupational pensions industry.
“Can the minister offer an assurance that the government will not simply be listening to the occupational pensions industry, which will quite clearly have strong and shared financial interests in this report saying one thing, and that there will be a consultation which listens to and consults independent experts?,” she asked.
In addition to the civil partnership ruling, same-sex marriage legislation comes into force later this month, meaning there will be three categories of legally bound couples for schemes to consider.
The government will be issuing a consultation on civil partnership benefits this month and will report its findings in July.
Schemes that already voluntarily provide equal survivors’ benefits to civil partners will need to decide soon whether to extend this principle to same-sex marriages, said Andy Lewis, an associate at law firm Hogan Lovells’ pensions team.
“This approach needs employer consent under the statutory amendment power the government has put in place, so it is right for trustees to be thinking about this now,” he said. “If the scheme is not amended, surviving same-sex spouses will only be entitled to the legal minimum benefits.”
The Department for Work and Pensions said its consultation would be seeking the views of a wide range of interests to make sure different opinions were properly represented.
A DWP spokesperson added: “There could also be significant additional costs for private sector occupational pension schemes. The review includes undertaking research on the extent to which there are currently differences in treatment in occupational schemes, which will allow us to refine estimates of the costs of equalisation.”
Further change possible
Lewis said that while it is pragmatic for most schemes to wait for the outcome of the government review, some members “might feel aggrieved” if the position later changes.
“At this stage schemes might find it more practical and helpful to look at how they treat other survivors, in particular civil partners, and whether it is logical and fair to be consistent for same-sex spouses," Lewis added.
Richard Lee, a partner at law firm Wragge & Co, said there is a need for clear benefit provision to be detailed in the scheme rules when same-sex marriage legislation comes into force, as there will still remain a civil partner category alongside two kinds of marriage.
“Trustees and employers should now consider the issue of benefit provision in light of the [same-sex marriage] legislation,” he said. “If they propose to simply adopt the current statutory minimum then there is no need for specific amendments to rules as general non-discrimination provisions will apply, although it is generally preferable to clearly document the agreed benefit provision.”
But Lee warned against rushing to change the scheme rules before there is further clarity from government “unless the employer or trustee agree, for example, that equal benefits will be provided for all married couples and civil partners”.
