On 12 July, the Supreme Court delivered its decision on the landmark case of Walker v Innospec Limited and others, overturning two lower appeal courts and ruling that Mr Walker’s husband is entitled to the same pension rights as an equivalent female spouse. While undoubtedly a victory for equality, the decision also has the potential to cause headaches for employers, trustees and pension providers.

What does it mean for your scheme?

It will require many schemes to take immediate action in relation to survivor benefits. Surviving spouses and civil partners could now be entitled to back-payments of pension, and scheme liabilities may need to be re-calculated to reflect this decision.

Schemes which already provide the same benefits for civil partners and same sex spouses as they do for spouses of different sexes should not have to take any action. However, those schemes that chose to provide such benefits only in relation to benefits accrued after December 2005 will need to review their rules with a view to making such changes as are required to ensure they are no longer discriminating against same sex couples.

Background to the decision

As the name would suggest, the Equality Act promotes the equal treatment of individuals regardless of their disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation. In the pensions context, the Act includes an overriding “anti-discrimination” rule, which means that trustees and employers are prohibited from treating any of the above protected characteristics unfavourably, and pension scheme rules must be interpreted accordingly.

In the context of Mr Walker’s case, civil partners (and later, same sex spouses) had to be treated equally to their opposite sex equivalents.

Of course, every rule has its exception: in recognition of the fact that civil partnerships were only introduced to the UK from 5 December 2005, and in order to avoid imposing on pension schemes retrospective obligations that may not have been funded for, an exemption was included in the Equality Act, meaning that the non-discrimination rule only applied in respect of a member’s service from 5 December 2005.

Unfortunately, what was designed to be “fair” for schemes had the potential to be very unfair for individuals, and this exemption meant that the Equality Act itself was guilty of discrimination: expressly permitting schemes to provide different levels of benefit for different categories of “spouse”.

By way of a simple example:

Jeff and Jim both started working and joined their scheme in 1990, and both got married in 2010 before dying in 2015.

Jeff’s wife was entitled to a spouse’s pension based on Jeff’s service from 1990-2015, whereas Jim’s husband could only receive a spouse’s pension based on his service from 2005-2015.

Mr Walker was even worse off. Since he had stopped working before 2005, his husband would be entitled to nothing at all. Unsurprisingly, Mr Walker took his case to the Employment Tribunal and won.

However, the decision was overturned on two subsequent appeals. Now, at the highest level of judicial review, the Supreme Court has followed the original decision, declaring the post-2005 pensions exemption to be discriminatory, and granting fully equal pension rights to same-sex spouses.