Trustees use discretion on gender-reassignment

This sensitive issue could affect any scheme – many of which follow the state model – causing possible disputes with members over gender equality and implications for spousal benefits.

Scheme members who go through gender-reassignment, particularly from male to female, can experience positive and negative changes in their benefits, from an increased guaranteed minimum pension (GMP) to a reduction in their spouse's pension.

When it comes to paying the GMP, a formerly male scheme participant who had not reached the age  – 65, for example – where they would benefit from the GMP could hit the corresponding female age, which could be all those elder than 60, following gender reassignment, and request their benefits to be amended accordingly.

And married members who reassign their gender from male to female and cease to be married find that, even if they choose to enter a civil partnership, their partner will not automatically be afforded the same entitlement as a spouse.

Schemes, then, need to communicate those changes, and to make sure they have the gender-reassignment certificate as evidence of the change, according to lawyers.

They can then treat the member as of the new sex for the purposes of the scheme, and even exercise discretion to replicate affected benefits such as those affected by marriage law.

“I don’t think you would need to rewrite the past, you only need to treat them as in the new sex from the point you are notified about it,” said Faith Dickson, a partner at Sackers.

Some schemes have had queries from members asking whether they will still get their spouse’s pension paid if they change gender, she said. Others have had entreaties from married members who have gone through gender reassignment but wanted to remain with their partner, by entering into a civil partnership.

Dickson said: “If they enter into a civil partnership, then certain benefits will need to be paid to the civil partner on death, although they may not be quite as expensive as the spousal benefits that will need to be paid.”

If they do not intend to enter into a civil partnership, the member may still be entitled to a dependant’s pension, in the place of a spouse’s entitlement. As a fairness issue, communication is crucial. Schemes need to make it clear to members what they qualify for as their gender is re-assigned.

Trustees can also use their discretion around how they deal with these rare situations, as the more “liberal” schemes are already doing, Dickson added.

“Quite a lot of schemes now will pay pensions to dependants fairly much as of right without of it being written as a right into the rules,” she said. “They will look hard to see if there was someone in a spouse-like relationship and pay to them.”

European ruling

In 2006, the European Court of Justice ruled the UK, prior to the 2005 Gender Recognition Act, was in breach of European equality legislation in not providing a means for recognising transsexual people for benefit purposes.

In June last year, the Court of Appeal handed down a judgement in favour of Christine Timbrell, who had remained married in her birth gender, male, and was thus being denied pension from the age of 60.

The DWP was not permitted to appeal the decision. In response to further questions in parliament earlier this month, pensions minister Steve Webb announced a working group is being set up to meet this obligation.

“In line with this [judgement], we are assessing the equal treatment claims of those people who reached age 60 before the [Gender Recognition] Act took effect,” said a DWP spokesperson, “and are setting up a team to assess the entitlement of those male to female transsexual people who submit claims for equal treatment.”

For the state entitlement, this problem will fade as the state pension age becomes equalised for men and women at 65.

In the meantime, a person found to be entitled will receive increasing weekly state pension payments on the basis of having deferred entitlement from age 60, or from the date they meet the criteria set out in the Court of Appeal.

Robin Ellison, head of strategic development at Pinsent Masons, said the pension age issue affects a tiny group of schemes, meaning amending rules it is not worth the money.

In the majority of cases, he added, schemes have used their discretion, with the agreement of the company, to provide an accelerated payment.

“Most schemes will just say we will worry about it when it happens,” he said.