Court of Appeal set to rule in landmark case on pension benefits affecting surviving civil partners

Out-Law News | 05 Oct 2015 | 6:20 pm | 2 min. read

The Court of Appeal in London is set to determine what pension benefits surviving civil partners are entitled to receive when their spouse dies in a landmark judgment due out on Tuesday.

Last year the Employment Appeals Tribunal (EAT) ruled that a surviving civil partner's entitlement to claim death benefits from his or her deceased partner's defined benefit (DB) pension scheme can be restricted to rights the scheme member built up from 5 December 2005, the date that civil partnerships were introduced.

Generally, the law treats civil partnerships in the same way as opposite sex marriages. However, the 2010 Equality Act, reflecting the earlier law introduced at the time when civil partnerships were established, allows pension scheme trustees to take account only of benefits built up from 5 December 2005 in calculating pensions payable on the death of a member in a civil partnership.

The case before the Court of Appeal concerns the pension of John Walker, who was a member of the occupational pension scheme run by his former employer Innospec. Walker built up his pension with the company from 1980 and had been receiving a pension from the scheme since his retirement in 2003.

Walker had been living with his male partner for some time before retirement and the two entered into a civil partnership shortly after the law changed, in January 2006.

Under the rules of his pension scheme, had Walker been married his wife would have been entitled to a pension worth two thirds of his considerable annual benefits if she had survived him. However, because his service with the company occurred entirely before the law changed, the EAT said that the most his partner could receive if he survived Walker was around £500 a year.

Walker had claimed that he had been unlawfully discriminated against on the grounds of his sexual orientation and won initial success before an employment tribunal, which ruled that although the scheme rules were permitted under the Equality Act, the Act itself was incompatible with EU law. However, that ruling was overturned by the EAT; a decision which Walker has appealed to the Court of Appeal.

Pensions expert Alastair Meeks of Pinsent Masons, the law firm behind Out-Law.com, said the government has carried out a review of same sex survivors' benefits but has yet to take steps in response. He said the outcome of the Court of Appeal's ruling could prompt the government to address the anomaly by changing the law. However, he said there are funding concerns that need to be addressed.

"The original Employment Appeals Tribunal decision was controversial, and many pension schemes had voluntarily chosen to treat civil partnerships in exactly the same way as opposite sex marriages," Meeks said. "There are a number of potential options for reducing the difference in treatment, but any measures short of full equal treatment may be subject to expensive legal challenge. However, the cost to schemes of providing fully equalised benefits could be substantial – government estimates in excess of £3bn have been reported, between private and public sector pension schemes, although there are also concerns that these figures may be underestimated."

"Making retrospective changes to pension schemes is always fraught with difficulty.  There are many points to consider - such as the impact of the extra cost on scheme funding or what to do about individuals who have paid additional contributions to purchase extra survivors' benefits," he said.

"More broadly, if Walker succeeds it will throw into doubt how EU directives need to be complied with in future. Implementation dates will need to be rethought," Meeks said. "Changing social mores may make past pragmatic compromises look out of date.  If so, who is going to pay for them?"