12 July 2017
- UK pension funds cannot discriminate against same sex partners
- Landmark ruling rightly requires pension schemes to treat all partners equally
- Costs could run to hundreds of millions of pounds
The Supreme Court has ruled that same-sex partnerships must be fairly and properly recognised within UK pension schemes. In a landmark ruling, ( INNOSPEC VS. WALKER) the judges ruled that a pension scheme member who is married to a same sex partner must be treated the same as if they had an opposite sex partner. At last, there is clarity that pension schemes cannot discriminate on gender grounds in this way.
What has the Court ruling changed? Until today, members who were married to someone of the opposite gender would know that their surviving partner will inherit part of their pension. Even if the member married that person long after they left the scheme, the inheritance rules would apply. However, if the member had a partner of the same gender, even though they may have been together for decades, their pension scheme might refuse to pay a survivor’s pension on the grounds that the law only recognised gender-equal partnerships since 2005.
Will this affect all UK pension schemes? In reality, most pension schemes have already been treating all partnerships the same, but around 20% of private schemes have not yet done so and Mr. Walker, who has lived with his partner for decades, has sued the Innospec pension scheme because it refused to agree that his partner would inherit his survivor pension rights for the entire period in which he belonged to the scheme. Having had to fight all the way up to the Supreme Court, the issue has been settled and all UK pension schemes will now have to pay survivors’ pensions to same-sex partners on the same basis as they would for opposite sex partnerships.
What might this cost? Estimates suggest that the cost to private sector pension schemes could be around £100million and there will also be costs for public sector pension schemes too. Of course we will not know the precise costs because the money only needs to be paid once the member passes away and only if the member is survived by their partner.
What other implications might there be? There could be further implications of this ruling, in that widow’s pension rights in many schemes differ from the pension rights of widowers. In some schemes, a husband cannot inherit the wife’s pension, but a wife will inherit that of her deceased husband. I expect this issue will now be looked at again – and the cost to public sector pension schemes could be hundreds of millions of pounds.