Lesley Browning and Catriona Stephen talk through the effect of the Walker case and the Marriage (Same Sex Couples) Bill on pension rights for civil partners

Current civil partner benefits
The Equal Treatment Directive, which prohibits discrimination on the grounds of sexual orientation, is translated into the Equality Act 2010, which provides that ‘an occupational pension scheme must be taken to include a non-discrimination rule’. However, Schedule 9 of the Equality Act allows a scheme to restrict ‘a person who is not married from having access to a benefit … the right to which accrued before 5 December 2005 (the day on which section 1 of the Civil Partnership Act 2004 came into force)’. In terms of pensionable service completed before 5 December 2005, civil partners are only entitled to contracted-out spouse benefits which accrued after 1988.

Despite this clear statutory exemption, in the recent case of Walker v Innospec, an employment tribunal held that a scheme which did not provide the same benefits to members’ civil partners as to spouses was discriminatory.

Walker
Walker worked for Innospec between 1980 and 2003, and was a member of the Innospec defined benefit pension scheme. He retired on an annual pension of around £85,000 in today’s terms. He applied for a civil partnership with his long-term partner on 5 December 2005, when the Civil Partnership Act came into force.

The scheme provided a member’s surviving spouse with an annual pension of two-thirds of the member’s pension. After the civil partnership provisions came in, the rules of the scheme were amended ‘to the extent necessary to comply with legislative requirements relating to benefits payable to surviving civil partners’.

In response to an enquiry by Walker, the trustees of the scheme stated that civil partners would be treated in the same way as married couples for any pensionable service since 5 December 2005, the minimum requirement under the statutory exemption. As all Walker’s pensionable service was before 2005, his civil partner would be entitled to an annual pension of around £500, half the guaranteed minimum pension, which was the only benefit payable in respect of pre-2005 pensionable service. Had Walker married a woman the same age as his civil partner, she would have been entitled to an annual pension of around £41,000. Walker brought the case to the employment tribunal, which, following European case law, found the scheme had discriminated against Walker.

The tribunal decided the statutory exemption was incompatible with the directive, but as a private-sector employer, Innospec was not directly bound by it. To circumvent this issue, the tribunal used its powers of interpretation under the Marleasing principle (which allows domestic courts to interpret national legislation, as far as possible, to comply with EU legislation).

The newly-interpreted statutory exemption allowed a scheme to restrict ‘a person who is not married or in a civil partnership from having access to a benefit … the right to which accrued before 5 December 2005.’ Innospec was therefore unable to rely on the exemption. On Walker’s death, his civil partner should be entitled to a fully retrospective spouse’s pension.

Marriage (Same Sex Couples) Bill
In its current form, this bill will give a surviving spouse in a same-sex marriage the same pension rights as a surviving civil partner, not an opposite-sex surviving spouse. It will therefore replicate the position under the statutory exemption for civil partners.

Comment
Arguably the tribunal in Walker over-stepped its powers of interpretation. Nevertheless, its decision is supported by elements of European case law. This case is being appealed to the employment appeal tribunal and may be further appealed to higher courts, so it may be some time before the law on this issue is certain.

The DWP estimates one-third of defined benefit schemes have incorporated the statutory exemption into their rules. These schemes, especially ones with significant numbers of civil partners, may wish to ask their actuary to estimate the potential costs impact of a change in the law requiring full retrospective benefits to be granted. Otherwise, schemes should await the outcome of the appeal before taking action, given the continuing uncertainty.

Written by Lesley Browning, partner, and Catriona Stephen, trainee solicitor, Norton Rose Fulbright LLP

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