The Supreme Court has handed down an important judgment relating to occupational pension scheme death benefits payable to same-sex partners. It has decided, in the case of Walker v Innospec, that a spouse's pension payable to a same-sex partner cannot be limited to the member's pensionable service completed on or after 5 December 2005.
This case has worked its way through the legal system culminating in the Supreme Court's decision.
Mr Walker worked for Innospec Ltd from 1980 until 2003 when he retired. He entered into a civil partnership with his partner in 2006 and they subsequently married. Mr Walker asked Innospec to confirm that, in the event of his death, his spouse would receive a spouse's pension based on his full pensionable service with the scheme. Innospec refused because his service predated 5 December 2005, the date that civil partnerships were introduced in the UK, and the Equality Act 2010 contains an exemption which permits pensions for civil partners or same-sex spouses to be restricted to pensionable service completed from 5 December 2005.
As a matter of EU law when a new rule of law comes into force, it cannot apply to legal situations which have arisen and become definitive prior to that date ("non-retroactivity"), but can apply to the future effects of a situation which arose under the old law ("future effects"). The Supreme Court recognised that these two basic principles of EU law do not sit easily alongside an entitlement to an occupational retirement pension, which is accrued at one point in time, but subject to variables at any point in the future which affect its amount, but it unanimously allowed Mr Walker’s appeal, declaring that:
- the relevant provision in the Equality Act 2010 is incompatible with EU law (namely the anti-discrimination Framework Directive) and must be disapplied
- Mr Walker’s husband is entitled on his death to a spouse’s pension based on Mr Walker's entire pensionable service, provided that they remain married until the date of Mr Walker's death.
In the Supreme Court's view "it is clear that, unless evidence establishes that there would be unacceptable economic or social consequences of giving effect to Mr Walker’s entitlement to a survivor’s pension for his husband, at the time that this pension would fall due [our emphasis], there is no reason that he should be subjected to unequal treatment as to the payment of that pension". The Supreme Court cited two recent and similar pension discrimination cases which were heard in the Court of Justice of the European Union (CJEU), which the Supreme Court said put the correctness of Mr Walker's position "beyond doubt".
The effect of this judgment is that any pension scheme which limits death benefits for same-sex partners by reference to pensionable service completed on or after 5 December 2005 will need to review their scheme rules and past practice as a matter of urgency. The case is high profile and is likely to be reported in the general press, so members may well begin to ask questions about what their scheme provides. Previous calculations under a scheme's rules relating to survivors' pensions will likely need to be revisited. Death benefit provisions will vary between schemes but in 2014 the Government estimated the cost of fully backdating same-sex benefits in public service pension schemes to be around £3bn and in private sector schemes around £0.4bn.
Alongside Walker v Innospec, the Supreme Court handed down its decision in another long-running discrimination case relating to the calculation of pension from an occupational pension scheme, O'Brien v Ministry of Justice. The case concerned how a pension payable to Mr O'Brien in his capacity as a part-time judge should be calculated – whether it should be based on his entire service or only his service since 7 April 2000 (the deadline for transposing the Part-time Workers Directive into national legislation). The majority of the Supreme Court "is inclined to think" that it is unlawful to discriminate against part-time workers when a retirement pension falls due for payment and that the entire period of service should be taken into account, as opposed to thinking that because the service was carried out before 7 April 2000 the entitlement to a pension based on that service was permanently fixed at that time and cannot be affected by the Directive.
However, the Supreme Court did not think that the CJEU has yet considered, from a principles-based position, the argument that if an occupational pension is treated as deferred pay, the right to which is acquired at the time of the work to which the pay relates, then it follows from the general principle of no-retroactivity that the Directive does not impact on pension already earned. The majority of the Supreme Court thought that the cases in which there has been a temporal limit on the effect of EU legislation were exceptional and confined to very extreme cases in which the economic consequences of not applying the limitation would be far-reaching for the vast majority of pension schemes, for example, in the Barber case. The Supreme Court has therefore made a referral to the CJEU requesting clarification of the correct approach to take. It appears that the O'Brien case will run for some time yet.