Court rules same-sex pension benefit ceiling to remain

The Court of Appeal ruled unanimously on Tuesday that the calculation of pensions for surviving civil partners will be restricted to members’ service on and after December 5 2005, when the Civil Partnership Act became law.

While the decision will come as good news for many schemes under funding pressure, it raises wider questions about equality on the grounds of gender and sexual orientation. 

UK pension schemes are only required to offer spousal benefits to those in civil partnerships and same-sex marriages based on their pensionable service since 2005, when the act came into force, but this stance has been challenged and counter-challenged over the past couple of years.

Equality fight

The case of Walker v Innospec, dismissed from the Court of Appeal this week, has unfolded in a series of instalments:

• John Walker had accrued 23 years of pensionable service as a member of his employer Innospec’s DB pension scheme. He has received a pension since his retirement in 2003.

• In accordance with current EU legislation, Walker’s husband and formerly civil partner will receive an annual survivor’s benefit of £500 a year.

• Under the scheme rules, if Walker was married to a woman she would be entitled to £41,000 a year.

• Walker claimed his former employer Innospec had discriminated against him by restricting survivor benefits to a member’s civil partner to service after December 5 2005.

• A decision by the Employment Tribunal in 2012 found that a civil partner’s pension should not be restricted to the period of accrual after December 2005.

• The ET decision was overturned in February 2014 by the Employment Appeal Tribunal, which ruled that the original restriction of benefits was compatible with EU law.

Dismissing Mr Walker’s appeal against the 2014 ruling last week, Lord Justice Underhill acknowledged that “Mr Walker and his husband will find this conclusion hard to accept. But changes in social attitudes, and the legislation which embodies those changes, cannot fully undo the effects of the past”.

Sue Tye, of counsel at law firm Baker & McKenzie, said the verdict would be a relief for sponsoring employers and trustees, who will not be required to change their scheme rules.

But she said the decision raised further questions about equal treatment for same-sex couples.

Only a policy decision from government can now change this at the national level

Sue Tye, Baker & McKenzie

Despite the “sound principles” of EU law on which the decision is based, she said it demonstrated how legislation “at times is unable to adapt to current social attitudes”.

Tye added: “Only a policy decision from government can now change this at the national level.”

But Matthew Swynnerton, partner at law firm DLA Piper, said a change in legislation was unlikely.

However, he added that many private sector schemes have exceeded their legal obligation by making changes to their scheme rules to address the current imbalance.

“In some cases employers are amenable to change because that sends quite a positive message to employees,” he said.

Extra burden

Last year the Department for Work and Pensions and HM Treasury conducted a review of survivor benefits in occupational DB pension schemes across the public and private sectors.

It estimated that the cost of removing variances in survivor benefits between different types of legal partnerships in public sector schemes would be £2.9bn, of which around £1bn would be payable immediately in respect of benefits due before April 1 2015.

The estimated cost to private sector schemes of removing these differences was around £0.4bn.

Anna Rogers, senior partner at law firm ARC Pensions Law, said the current position was “rough justice” but that sweeping changes would be a “huge extra burden” for schemes, particularly in the public sector.

“Everyone is in favour of equalisation but the lines have to be drawn somewhere,” she said.