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Jean-Yves Gilg

Editor, Solicitors Journal

All my worldly goods with thee I share

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All my worldly goods with thee I share

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What can you do when your pension scheme provider clearly discriminates against you, but is completely protected by the law of the land? Not much, it appears

John Walker is a pensioner with the Innospec Pension Scheme. He worked for Innospec for more than 20 years until his retirement over 10 years ago. At the time of his retirement, he was in a long term relationship and has recently married his long term partner.

Generally if a pensioner dies, his or her spouse is entitled to their pension under the rules of the scheme. Usually this is about half of the member's pension, but not in this case. Mr Walker's spouse is also a man.

As a result of the Marriage (Same Sex Couples) Act 2013, same sex married couples must be be treated exactly the same way as heterosexual married couples in many areas of life, but that is not the case when it comes to pensions.

As the law and the Innospec Pension Scheme currently stand, Mr Walker's partner would only be entitled to a small percentage of his pension in the event of his death.

Mr Walker is appealing his position to the Court of Appeal (see bottom of article for an update). He first brought his case to an employment tribunal, claiming that the treatment of his same sex civil partner (as he then was) was unlawful. The employment tribunal upheld his claim. However this was in turn appealed to the Employment Appeal Tribunal (EAT). Though the EAT agreed that Mr Walker's treatment was direct discrimination, it was not unlawful. How can this be?

One rule for us, one rule for them

The difference in treatment between same sex couples and heterosexual couples under the Innospec Pension Scheme is lawful because the requirement to equalise treatment applies only in relation to pension benefit earned after 5 December 2005. It does, though, apply to all of what is known as the guaranteed minimum pension, which has links to the state pension.

In addition, the Equality Act 2010 includes an exemption (paragraph 18 of schedule 9) which states that private pension schemes are only required to equalise benefits for same sex civil partners or spouses, from the date the Civil Partnership Act came into force - 5 December 2005.

Though this may seem inequitable, the government has two arguments in support of its position and the law as it now stands.

  • The EU directive is not retrospective. Consequently there is no requirement to comply with the EU Equal Treatment Directive in relation to the time before it came into effect. Though this may be technically correct, it does not address any fairness arguments.

  • The government has claimed that full equalisation of benefits would cost £3bn.

Where does this sum come from, and what exactly does it represent? Who has carried out the actuarial analysis to produce this figure?

Most pension schemes assume a certain percentage of members, around 70 per cent, are married when they take their benefits. Actuaries estimate the funding requirements of the scheme on that basis. Given the numbers involved, recognising same sex marriages (or civil partnerships) would not really affect that percentage.

Another point is whether this extra cost simply reflects the administrative impact of making these changes, or is it an estimate of the additional benefit that may be paid? In any individual case, additional benefits are clearly important. It is not clear, though, that overall this would lead to any major cost given life expectancies for men and women. Typically men die at a younger age than women.

£3bn sounds like a lot of money but in relation to the trillions of pounds which makes up UK pension scheme assets, it is small fry. Spread across individual schemes, any extra cost would be minimal.

It is worth remembering that not all private sector pension schemes have taken the same stance as Innospec. Not all employers and trustees have sought to comply simply with the minimum.

Some schemes genuinely treat same sex couples exactly the same as heterosexual couples. It is an option for all schemes to do more than the bare minimum and to genuinely provide benefits on a fair and equal basis. It will be interesting to see how the Court of Appeal deals with these issues and tackles the lack of fairness and inequality claimed.

The High Court handed down judgement in Innospec Ltd & Ors v Walker (Interested Party: Sec of State for Work & Pensions) UKEAT/0232/13/LA on 6 October 2015.

Esther White is a senior associate at Charles Russell Speechlys