The Supreme Court in Walker v Innospec Limited, overturning the Court of Appeal, has decided that the exemption for service prior to December 2005 from the requirement for occupational pension schemes to give survivors' benefits for same-sex married partners is incompatible with EU law. All pension schemes which limit civil partner/same-sex married benefits by reference to post-5 December 2005 service, but provide a more generous pension for opposite-sex married partners, will need to amend their rules. Additionally, where there are civil partner/same-sex married pensions already in payment which are limited by reference to post-5 December 2005 service, trustees and employers should consider proactively increasing the benefit to pre-empt any claims.
Discrimination in the workplace on the grounds of sexual orientation has been unlawful in the UK since 2003. For the purposes of survivors' pensions payable under occupational schemes, the Equality Act requires equal treatment for civil partners and same-sex married partners, but (in relation to all but the contracted-out element of the pension) only for pensionable service from 5 December 2005 (the date the Civil Partnership Act came into force).
The claimant in Walker v Innospec was a member of his employer's contributory pension scheme from 1980 until his retirement in 2003. Under the rules of the scheme his surviving spouse would receive a pension on his death. At the date of his retirement, the claimant had been living with his male partner for 10 years; they registered a civil partnership in 2006 and have since married. However, as all his service was completed before 5 December 2005, the only pension payable to his husband was about 1,000 (his GMP), whereas if the claimant was married to a woman, his pre-5 December 2005 service would be taken into account, and she would receive on his death a pension of about 45,000.
The claimant challenged this and, although the Employment Tribunal found in his favour, the EAT and the Court of Appeal reversed that decision. They decided that the claimant's entitlement to pension benefits was earned incrementally during his period of service. At the time when he earned that entitlement the discriminatory treatment was lawful. In line with the European law principle that legislation is not retroactive (in other words, it does not apply historically) unless it expressly says so, that treatment could not later become unlawful retrospectively.
Supreme Court decision
The Supreme Court, in a judgment that has surprised many, has held that the exemption for pre- 2005 service is incompatible with EU law and the claimant's husband is entitled on the claimant's death to a spouse's pension, provided they remain married.
Following EU case law on the equal treatment rights of same-sex partners to survivors' pensions, the Supreme Court decided that, unless there was evidence that there would be "unacceptable economic or social consequences" of giving effect to the claimant's entitlement to a survivor's pension for his husband, there is no reason why he should receive unequal treatment in relation to the payment of the pension.
The Supreme Court said that the Court of Appeal's approach to the issue had been incorrect. Although there is a general rule under EU law that legislative changes do not apply retrospectively, this only applies to situations which are "permanently fixed" before the legislation came into force. In this case, the right to a spouse's pension was not fixed at the date of retirement the claimant could have married after that date, for example. The Court of Appeal had been wrong to extrapolate from the position on rights relating to equal pensions/pay for men and women (where EU case law limits the historical application of the Barber decision). There the issue was the application of a court ruling (where the general rule is that decisions do have retrospective application unless there are exceptional circumstances) whereas Walker was a case on legislation, where different rules apply.
In any event, the survivors' pension was not earned during employment; it was something that the spouse became entitled to when the member died. As the Supreme Court explained, if the claimant married a woman in 2017, and then died, she would be entitled to a full spouse's pension, even though she was not married to him at the time he accrued benefits. In other words, providing equal treatment for the claimant's same-sex spouse would not be retrospective.
What are the implications of the decision?
The decision applies to all pension schemes which limit civil partner/same-sex married benefits by reference to post-5 December 2005 service, but provide a more generous pension for opposite-sex married partners. We therefore think:
Any pensions coming into payment in future to a samesex spouse will need to be equal to the pension which would have been paid to opposite-sex spouse.
For pensions already in payment which are not equal, the recipient probably has a strong claim that their pension should be increased. Schemes may want to consider (and discuss with the employer) whether those pensions should be uplifted (and back-payments made) without waiting for any claim.
Arguably, the court's conclusion could be read as suggesting that spouses' pensions which are not in payment yet, are not "accrued rights" (given the Court's analysis that they were not earned by reference to the member's pensionable service) in which case there is an argument that they could be taken away. We expect very few schemes/employers would wish to consider doing so, however, as the adverse publicity and likely challenge might outweigh any possible cost-savings for the scheme.
Could the government reverse the effect of the decision as part of Brexit?
This seems improbable. The Great Repeal Bill going through Parliament now will repeal the European Communities Act 1972 on the day that the UK leaves the EU. However, the Bill will convert EU law as it stands at the point of exit into domestic law. This is designed to ensure that the same rules and laws apply the day after exit as on the day before.
The Great Repeal Bill will also allow the government to use secondary legislation to correct primary legislation "where necessary, to rectify problems occurring as a consequence of leaving the EU". But the government confirmed in a White Paper earlier this year that the power is not intended to be used to implement policy changes. This means that any changes to EUderived rights after Brexit will be implemented following a period of "full scrutiny and proper debate", as the Prime Minister put it in her Foreword to the White Paper. In any event, a change which would reinstate different treatment for same-sex and oppositesex partners seems highly unlikely.