Do your pension plan rules marry-up with member expectations?
Since the Millennium it is fair to say the world has changed a great deal for defined benefit pension plans. Not least of the changes trustees have had to contend with are those in respect of survivors’ benefits. The majority of defined benefit pension plans make some provision for a pension to be paid to a surviving spouse on the member’s death and, given recent changes in legislation, it has been necessary for trustees to examine and amend survivors’ benefits for civil partners and same-sex spouses. The recent decision in the Brewster case represents another development in thinking as regards survivors’ benefits and trustees will be interested in its potential applicability to UK pension plans.
The Brewster case
The facts of the case are fairly straightforward. Denise Brewster’s partner Lenny McMullan was a member of the Local Government Pension Scheme in Northern Ireland. Denise and Lenny had lived together for ten years and became engaged in December 2009. Unfortunately and quite unexpectedly Lenny died two days later. At the time Lenny died, the Local Government Pension Scheme in Northern Ireland was administered in accordance with rules set out in the Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations (Northern Ireland) 2009 (the 2009 Regulations). Amongst other things, the 2009 Regulations provided a co-habiting partner a pension on the death of the member provided certain criteria set out in the 2009 Regulations had been met. There was an additional requirement that the co-habiting partner had been nominated by the member.
There was no argument that Denise fulfilled the criteria of a co-habiting partner under the 2009 Regulations; however, it seems her partner Lenny had not completed the requisite nomination form. (There was some debate as to whether a form had been completed but not sent/received – but nothing in the case really turns on that point.) Denise Brewster applied for judicial review of the decision on the grounds that it breached her rights under the European Convention on Human Rights not to be discriminated against because of marital status. She argued that it was unfair and discriminatory to require a co-habiting partner to be named in a nomination form where the same condition did not apply to a spouse. And, after some consideration of the legal issues, the Supreme Court decided Denise Brewster was right on this point (essentially meaning that the nomination requirement under the 2009 Regulations should be disapplied meaning she was entitled to receive a co-habiting partner’s pension from the Local Government Pension Scheme in Northern Ireland).
However, the decision in Brewster is likely to be of limited application in relation to private sector pension plans mainly because a potential beneficiary cannot bring a direct action for breach of human rights against trustees of a private sector pension plan.
Implications for trustees
The Brewster case has attracted a lot of media attention. Trustees should expect their members to have read reports of the case and be prepared that questions may follow as to the provision of survivors’ benefits. For this reason, trustees should make sure that they are familiar with the death benefits provided by the pension plan and at the same time should satisfy themselves that they comply with legal requirements for civil partners and same-sex spouses. Trustees are advised to take legal advice if they have not reviewed these provisions in the recent past or if they have any concerns regarding the impact of the Brewster decision.