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Pension equality for same sex couples?

Pension equality for same sex couples?

money maze

A landmark ruling by the Supreme Court on 12 July found in favour of a businessman who argued for equal pension benefits for his husband.

John Walker brought the case to secure the same pension rights on his death for his husband as would have applied for a wife. Despite making the same pension contributions as heterosexual colleagues, his husband was only entitled to a pension of £1,000 a year after his death, compared to £45,000 a year that would have been payable if he had married a woman.

An earlier ruling in this case prompted Prospect to submit a motion to the TUC LGBT conference last year. The introduction to the motion captured our position:

“Conference is disappointed that the government has failed to address inequalities in pension provision for civil partners and same sex married couples. The government’s failure to act has meant that the Court of Appeal was able to rule, in the case of John Walker against Innospec, that same sex survivors’ pensions do not have to take account of service before 5 December 2005. It cannot be justified that this discrimination should be allowed to continue.”

The Supreme Court should be applauded for stepping in to resolve an injustice that successive governments refused to address.

This blog covers the background to this issue as well as exploring the potential implications of the judgment. 

How was this discrimination legal in the first place?

Same sex partnerships were first legally recognised as a result of the Civil Partnership Act 2004 (which allowed for civil partnerships to be registered from December 2005).

When this Bill was first presented to Parliament it only provided for benefits for civil partners for future service after the introduction of civil partnerships. This was on the basis that new benefits were usually introduced prospectively.

After significant lobbying, the government moved its position to requiring some schemes (that provided contracted out benefits - the vast majority of defined benefit pension schemes) to provide benefits for civil partners on part of the pension (known as the GMP) from April 1988 (this is the first date they were required to provide the same benefits for widowers).

Government went even further and provided for benefits for civil partners for all pension earned from April 1998 in the main public service pension schemes (eg for civil servants, teachers, NHS employees etc.).

There was no change to the minimum statutory requirement for other pension schemes (those that were not contracted out). They still only had to provide benefits for civil partners for service from December 2005 as originally proposed.

In case that got a bit confusing, I’ve summarised the position after this legislation came into force in the table below:

 

Type of pension scheme

Service before Apr '88

Service between

Apr ’88 and Dec '05

Service after Dec '05

Public sector 

No entitlement

Full entitlement

Full entitlement

Contracted out private sector

No entitlement

Part entitlement

(GMP)

Full entitlement

Contracted in private sector

No entitlement

No entitlement

Full entitlement

 

 

 

 

 

 

 

 

 

 

(Note: it was open to any private sector employer to also go beyond the legal minimum requirement and, for example, provide a pension to civil partners based on all service.)

At the time civil partnerships were introduced, the Employment Equality (Sexual Orientation) Regulations 2003 prohibited employers from unreasonably discriminating against employees on grounds of sexual orientation. However Regulation 25 specifically exempted restricting access to benefits on the basis of marital status.

These Regulations are now superseded by the Equality Act 2010. Paragraph 18 of Schedule 9 of that Act exempted excluding civil partners from pension benefits built up before civil partnerships were introduced in December 2005.

So nothing in equality legislation contradicted the approach taken for pension benefits when civil partnerships were introduced.

Did same sex marriage not resolve this?

Pension rights were one of the key issues debated when legalisation to allow same sex marriage was introduced. Opposition MPs and Peers argued strongly for full pension equality for couples in same sex marriages.

Government had concerns about the potential cost involved. Ministers cited both the cost of removing the exemption in the Equality Act 2010 but also the risk that equality for same sex couples would also lead to gender equality (ie basing widowers' benefits on service from April 1978 as for widows).

Under pressure to explain and defend its position, the government conceded a review of survivor benefits (in Section 16 of the Marriage (Same Sex Coupes) Act 2013).

As well as requiring a review of the differences in survivors' benefits for various groups, the legislation also required estimates of the cost of eliminating those differences and granted powers for government to change the law if that was considered necessary.

What did the review of survivors' benefits show?

The review was published in June 2014. It drew on estimates by the Government Actuary's Department of the cost of (1) providing the same benefits to civil partners and same sex spouses as opposite sex spouses and (2) providing benefits for widowers in line with minimum statutory requirements for providing benefits to widows.

In a report for the DWP, GAD estimated that the cost to private sector schemes would be (1) £100m and (2) £300m. While these are large sums, they represent a tiny proportion of the overall liabilities of these schemes.

In a letter to Treasury, GAD estimated that the cost to public sector schemes would be (1) £20m and (2) £2,900m. Again these are undoubtedly large sums but it is important to assess them in the context of the overall liabilities and the impact these measures would have on the cashflows of the schemes.

These figures indicate that government's biggest concern was probably the cost of equalising survivors' benefits by gender. Estimates indicated that there could be an upfront cost of £1 billion from backdating public sector pensions in payment and ongoing costs of £100 million a year.

How did government respond to the review?

The conclusion of the review stated that "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".

As late as November 2016, ministers told Parliament that "a decision will be made in due course".

But actions speak louder than words. While it said it was considering the review, the government applied to join the case and actually led much of the argument against Mr Walker.

What did the Supreme Court say?

Unsurprisingly the judgment in this case was quite complicated (there is an added twist in that two of the justices agreed with the decision but on more limited grounds than those given by the majority).

Some key findings were:

Paragraph 17: EU legislation drove the protection of gay and lesbian employees from discrimination at work.

Paragraph 72: The exemption from providing equal pension benefits to same sex partners in the Equality Act 2010 is incompatible with EU law.

Paragraph 74: Being incompatible with EU law, this provision must be disapplied.

From 12 July there is no legal basis for awarding a lower benefit to a civil partner or same sex spouse than an opposite sex spouse.

What does this mean for other couples?

This could depend on what the government decides to do next. It could announce that it accepts the decision and will amend the legislation in line with the judgment. It could go further than the judgment and announce that it will legislate for equal benefits for widowers too.

Doubtless there are other options being considered. Trade unions will want to ensure that legal protections under EU law are not eroded during the Brexit process.

So far, government has said that it is reviewing the implications of the judgment and will respond in due course.

In the meantime, private sector pension schemes will be reviewing benefits paid to civil partners and same sex spouses and assessing the cost of removing any unequal treatment and considering doing so.

If you think you or your partner have not been treated equally, get in touch with your local Prospect rep or call us.

Neil Walsh

Neil Walsh


Comments

  • Thanks for this summary of a complex subject.  The result is very positive. It's shame that equal treatment of same sex couples should be decided (by the government) based on the cost of treating people equally rather than recognising an injustice and rectifying that, because it is the decent thing to do.

    Simon Peter Baldwin

    14 August 2017 22:59


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