The Employment Appeal Tribunal (EAT) has ruled that pension schemes can restrict the entitlement of a surviving civil partner to a spouse’s pension to service on and after 5 December 2005. Although less favourable treatment of same-sex partners, in comparison with people who are married, is a form of direct discrimination, the EAT ruled that an exception in the Equality Act 2010 which permits such a restriction is compatible with EU law and, therefore, can be relied on by pension trustees and employers.
Civil partners, non-discrimination and pensions: a quick reminder
Same sex couples have been able to enter into civil partnerships since 5 December 2005. Since then, less favourable treatment of same-sex partners, in comparison with people who are married, has been a form of direct discrimination because of sexual orientation. However, an exception was built in to the equality legislation which states that it is not unlawful to restrict civil partners’ access to benefits that accrued before 5 December 2005 or are payable in respect of service before that date. Many UK pension schemes have relied upon this exception to restrict the entitlement of surviving civil partners to a spouse’s pensions under pension plans to service on or after 5 December 2005.
Walker v Innospec
In this case the claimant challenged the practice of restricting surviving civil partners’ entitlements to spouses’ pensions in this way.
Mr Walker claimed that this difference in treatment between married couples and civil partners was unlawful discrimination and that the exception under the Equality Act 2010 was incompatible with EU law and should be disapplied. An Employment Tribunal agreed with Mr Walker and, in order to make the Equality Act exception compatible with EU law, they interpreted it in such a way that it would no longer apply to civil partners.
However, the EAT has overturned the Employment Tribunal’s decision in a judgment delivered yesterday. Finding in favour of Innospec Ltd and the trustees of its pension plan, the EAT held that the Equality Act exception was compatible with EU law.
The EAT also held that, even if the exception had not been permitted by EU law, the Equality Act could not be interpreted in a way that would give effect to EU law as this went against the clear intention of Parliament and crossed the line between interpreting legislation (which is for the Courts to do) and making legislation (which is for Parliament).
The outcome in this appeal will be welcomed by employers and pension trustees. It is clear that when Parliament legislated on this matter, it was fully aware of the need to comply with the relevant European Directive and protect the rights of civil partners and it did so. At the same time, by including in the Equality Act the exception relied on in this case, it took on board the very significant practical problems that would arise from retrospectively imposing additional funding pressures on pension schemes, particularly final salary schemes.
What does this mean for pension plans?
Subject to any further appeals in this case, the EAT’s decision means that pension plans can continue to restrict the entitlement of surviving civil partners to a spouse’s pension to service on and after 5 December 2005 if they want to. The same will apply to surviving same sex spouses when same sex marriages become possible from next month.
Secretary of State’s review
It is important to bear in mind, however that the Secretary of State is currently undertaking a review of the difference in treatment of civil partners and same sex married couples under occupational pension schemes. As part of this he is required to consider whether to change the law to eliminate or reduce that difference in treatment. If he considers it necessary to change the law he has the power to do so under the Marriage (Same Sex Couples) Act 2013. Therefore, the EAT’s judgment may not be the final word on the subject and trustees and employers need to be alert to further developments.