The Court of Appeal issued a judgment this week in a case concerning the provision of survivors' benefits to civil partners and same sex spouses by occupational pension schemes. In this Pensions Alert we report on the Court's conclusions and the implications for schemes.
There is a European Directive which established a general framework for combating discrimination on a number of grounds including sexual orientation.
The Equality Act 2010 contains an exemption which provides that it is not unlawful discrimination relating to sexual orientation to prevent or restrict a person who is not married to a person of the opposite sex from accessing a benefit which is payable in respect of periods of service before 5 December 2005 (the date the Civil Partnership Act 2004 came into force) (Exemption). Some pension schemes mirror the Exemption and limit pensions payable to surviving civil partners and same sex spouses to the member's period of pensionable service on and after 5 December 2005. (It should be noted that this relates to benefits which are not contracted-out. Contracted-out benefits have to be provided based on service on and after 6 April 1988.)
The case considered by the Court of Appeal (Walker v Innospec and Others) concerns a challenge to the lawfulness of this restriction, and is therefore of note to any schemes which currently rely on the Exemption.
Mr Walker retired on 31 March 2003 and all of his service in Innospec's pension scheme was therefore prior to 5 December 2005. Mr Walker and his partner registered a civil partnership on 23 January 2006 and have since married.
The tribunal judgements
In November 2012 the Employment Tribunal (ET) upheld Mr Walker's complaint concluding that restricting benefits to service on and after 5 December 2005 was unlawful discrimination and that the Exemption could and should be interpreted to be compatible with European law.
In February 2014 this decision was overturned by the Employment Appeal Tribunal (EAT). The EAT held that the Exemption did not contravene European law and that, even if the ET had been correct in concluding that it did, its approach impermissibly crossed the line between interpreting the law and legislating.
Mr Walker appealed to the Court of Appeal which issued its judgment on 6 October 2015.
The Court of Appeal's decision
The Court of Appeal dismissed the appeal, with its conclusions including the following.
- Mr Walker's entitlement to benefit was part of his pay and was earned incrementally during his period of service. His entitlement must therefore be judged by reference to the EU law in force at the time of his service, and at this time the different treatment in relation to survivors' benefits was lawful. It would go against the principle of EU law of 'no retroactivity' if conduct which was lawful when it occurred was retroactively to become unlawful.
- This conclusion is consistent with the analysis of the nature of pension rights previously adopted by the Court of Justice of the European Union (CJEU). The Court of Appeal rejected the submission that two decided cases had reached a different conclusion.
- The Exemption is not incompatible with the relevant European Directive. It is clear and cannot be interpreted in such a way as to enable the claim to succeed. The Exemption was expressly designed to preclude a claim such as this one from being made and to allow the claim would be to make new law. The Court found support for its conclusion that the question of whether survivors' pensions should be extended to same sex couples is a matter of policy in the fact that the Marriage (Same Sex Couples) Act 2013 requires the Government to review the differences in survivor benefits in occupational pension schemes and, in light of the review, to consider whether changes in the law are needed.
The Court considered whether a reference should be made to the CJEU but concluded that it was sure enough of the answer to decide the case without doing so.
Implications and possible future developments
This judgment does not alter the existing position. It means that it will not be unlawful for schemes to continue to restrict the benefits payable to surviving civil partners and same sex spouses to service on and after 5 December 2005 in line with the Exemption.
In terms of future developments, it remains to be seen whether the judgment will be appealed to the Supreme Court. It is also worth noting that a report about the Government's review of survivor benefits was published in June 2014. However, the Government has not yet announced its conclusions as to whether the law should be changed, stating in the report that the costs and the potential impact on pension schemes, along with the wider consequences of making retrospective changes to schemes rules would need to be considered very carefully before making a decision.