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14 June 2013 0 Comments
Posted in Opinion, Private Client

Oh, not equality again!

Posted by , Partner

The recent publicity on same-sex marriages – now allowed in France and in some states of the USA – has drawn attention to a bizarre anomaly in the British pensions legislation. It concerns the entitlement of a same-sex partner to a spouse’s pension.

On 5 December 2005 the Civil Partnership Act 2004 reached the statute book. After that date the intention was that civil partnerships were to be treated, for the great majority of purposes, as equivalent to marriages.

The current equality legislation in this country, the Equality Act 2010, makes sexual orientation a “protected characteristic,” on an equal footing with age, race, religion and disability.  Section 13 of the Act then says : “A person (A) discriminates against another (B) if, because of a protected characteristic, A treats B less favourably than A treats or would treat others”. That seems clear enough to me.

The problem here is tucked away in Schedule 9 to that Act. This provision says that it is not discrimination if a civil partner is prevented from access to a benefit in respect of a period of service before 5 December 2005. You can see a certain sort of logic here – civil partnerships did not exist before December 2005, so pensions for civil partners need not go any further back.

But let us take an example. A pension scheme has two members, G and H. The scheme incorporates a provision giving civil partners benefits only from 5 December 2005 onwards. On the same day in December 2006, when G and H both have 20 years’ pensionable service, G is married and H enters into a civil partnership. G and H both die in December 2013. G’s spouse is entitled to a pension using the whole of G’s pensionable service, 27 years. H’s civil partner, on the other hand, is only entitled to a pension using pensionable service back to December 2005, 8 years. Now is that, or is it not, discrimination because of sexual orientation?

Clearly I am not alone in my views. A meeting of Parliament’s Public Bill Committee on 7th March, discussing the proposed same-sex marriage legislation, stated that broadly two-thirds of schemes had voluntarily adopted the same pension benefits for civil partners as for spouses. However, we have now had definitive guidance on how British Courts and Tribunals are to interpret this point, using a European Court precedent.

A certain Mr Walker retired from Innospec Limited in 2003 on an annual pension of £85,000. He entered into a civil partnership in 2006, but was told by Innospec’s pension scheme that his civil partner would only be entitled to a contracted-out pension of £500 a year. If he had married, the scheme admitted that his wife would be entitled to half his £85,000 pension. But the scheme rules contained a provision limiting a civil partner’s pension to half the pension accrued since 5 December 2005. As Mr Walker had accrued no pension after 2003, no pension was due.  Mr Walker appealed to an Employment Tribunal, putting forward the German Maruko case of 2008.

The Germans have an equivalent to our civil partnership, called a “life partnership”.  Mr Maruko entered into a life partnership and his partner died. When the partner’s employer, a state theatre company, refused to pay Mr Maruko a pension, he claimed unlawful discrimination because of sexual orientation, and the case went up to the European Court.

As the Maruko case clearly had far-reaching implications, the British Government decided to become involved, and made its own submissions. It quoted the preamble to the 2000 Equal Treatment Directive, which appeared to give the British Government the power to decide which pension benefits it gave to civil partners.

The European Court did not agree. It said that member states must comply with European non-discrimination principles, and besides, it said preambles to Directives have no legal effect. Making the point even clearer, it awarded Mr Maruko a full pension.

So the English Employment Tribunal in the Innospec case swallowed hard, and ruled that national legislation should be interpreted so as to be compatible with European Directives. Mr Walker’s civil partner was entitled to the same pension as if he had been a spouse.

The ridiculous thing about this whole matter is that it is, in terms of each particular pension scheme, a very small expense. Scheme actuaries will not have to make vast amounts of provision for civil partners’ pensions (or even same-sex spouses, if the legislation is passed). Most schemes already make an assumption that a certain proportion of members – usually half – will be married, and this assumption will not have to be radically revised.

So if your scheme still has a restriction on civil partners’ pensions, I would advise you to remove it at once, as it is now obvious which way this particular wind is blowing.

If you have any comments on this blog please contact Roger May on 02075832222 or rdm@royds.com

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