Summary

The Marriage (Same Sex Couples) Act 2013 (the Act) came into force on 13 March 2014, permitting same sex weddings from 29 March 2014and enabling civil partners to convert their civil partnership to a marriage. In addition, the Act provides that references in existing legislation to “marriage” will include same sex marriage. Legislative references to “husband”, “wife”, “spouse”, “widow” or “widower” will also include same sex spouses.

For civil partners, an exemption is provided under schedule 9, paragraph 18 of the Equality Act 2010 (the Exemption), permitting discrimination on the grounds of sexual orientation where benefits derive from service prior to 5 December 2005, the date the Civil Partnership Act 2004 came into force. This means that a pension scheme may lawfully restrict the non-contracted-out benefits received by surviving civil partners to those deriving from the member’s post-5 December 2005 service only. This same restriction can be applied to same sex spouses.

Do scheme rules need to be amended?

Non-contracted-out schemes

The anti-discrimination provisions in the Equality Act 2010 are overriding, so if schemes wish to restrict same sex spouses’ non-contracted-out benefits in the same way as those for civil partners, no formal rule amendment is required. In other words, schemes can still rely on the Exemption to provide non-contracted-out benefits relating only to post-5 December 2005 service to surviving same sex spouses.

Where a scheme has already granted civil partners the same right as opposite sex spouses to receive a full spouse’s pension for all pensionable service, the rules will need to be amended to clarify that such benefits also apply to same sex spouses. Failing such amendment, anomalies could result if civil partners convert their partnership to a marriage.

The Marriage (Same Sex Couples) Act 2013 (Consequential Provisions) Order 2014 allows trustees to modify their scheme rules by resolution to give effect to the requirements of the Act. Where such benefits are to exceed the statutory minimum, for example, by including pre-5 December 2005 service, employer consent will be required.

The extension of the legislative interpretation to “marriage” (and the other related terms above) does not apply to pension scheme documentation which existed before 13 March 2014. Such terms in these documents will continue to be interpreted as referring only to opposite sex couples. However, please see below in relation to pension scheme documentation created on or after 13 March 2014.

Contracted-out schemes

Contracted-out benefits for pensionable service:

  • between 6 April 1988 and 5 April 1997, the guaranteed minimum pension paid to a surviving civil partner is the same as that paid to a widower; and
  • between 6 April 1997 and 4 December 2005, civil partners are entitled to benefits which satisfy the reference scheme test.

The contracting-out changes are not overriding and schemes may need to amend their rules, depending on how their contracting-out provisions are expressed. Where a scheme is contracted-out on the reference scheme test basis, the scheme actuary must certify that the test continues to be satisfied (a “Regulation 42” certificate).

The decision in Walker v Innospec Ltd

In 2012, an employment tribunal held that Innospec Ltd, the employer, had directly discriminated against Mr Walker, by refusing to provide a pension (in the event of his future death) to his surviving civil partner in respect of pre-5 December 2005 service. The tribunal held that it was unlawful for a scheme to provide anything other than a full spouse’s pension for surviving civil partners, and that the Exemption was incompatible with the Equal Treatment Directive.

However, that decision has now been overturned by the employment appeal tribunal (EAT). In a judgment delivered on 18 February 2014, the EAT stated:

“[The Exemption] does not prevent a pension scheme adopting the equalisation of benefit for all time past and future as between the spouse and the civil partner, and we are told some have done so: but it permits those who consider they should not do so from being obliged.”

To interpret the Exemption as incompatible with EU law, the EAT concluded that it would be asked to “legislate rather than interpret” and that such an approach was not possible. In the absence of a future successful appeal by Mr Walker to the Court of Appeal, the EAT’s decision is binding.

Other points to note

In order to avoid any confusion, schemes may wish to disapply specifically the interpretation provisions under the Act where consolidating deeds and deeds of amendment are executed after 12 March 2014. This will ensure that the terms “marriage”, “widow” etc will not also refer to same sex spouses under the scheme documentation.

Death benefits that are provided on a basis not referable to pensionable service (that is, they are based on a salary multiple) must be provided in the same way as for opposite sex spouses.

Pension sharing on divorce provisions should apply to same sex spouses in the same way as to opposite sex spouses.

Other scheme documentation, such as the scheme booklet, should also be checked to ensure the scheme’s approach is accurately reflected.

Ongoing review

Section 16 of the Act requires the Government to review the benefits provided under occupational pension schemes for same sex and opposite sex survivors in legal relationships. The review started in January 2014 and the Government is required to publish a report by 1 July 2014. It is possible that the law will be changed further and schemes may be required to eliminate any differences in survivors’ benefits altogether.

Conclusion

Despite the ongoing review, we recommend that employer and trustees consider what changes are required to schemes to provide benefits for same sex couples. Care needs to be taken if an unrelated deed is executed, as the statutory override could operate and provide unintended benefits to same sex spouses and/or civil partners.