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Landmark ruling on pensions for same-sex partners

Pensions Corporate Consulting|Defined Contribution|Retirement

July 13, 2017

Supreme Court ruling provides full equality for pensions for same-sex partners

When is legislation retroactive? For that matter what does retroactive effect mean in relation to pensions? These issues and others were considered by the Supreme Court in its ruling in Walker v Innospec which has been hailed in the press as a landmark victory for gay couples.

Mr Walker brought a case against his employer, Innospec, because it denied his civil partner (now husband) entitlement to a pension that would be payable had Mr Walker married a woman. Innospec relied on an exemption in UK legislation from the general prohibition on discriminating on the grounds of sexual orientation. That exemption applied in respect of rights that accrued before 5 December 2005 (the date the relevant part of the Civil Partnership Act 2004 came into force). This was generally thought to mean that it was legitimate for schemes to restrict a survivor’s pension for a same sex partner to the member’s service on or after that date (except in relation to certain contracted out rights). Mr Walker’s service was entirely before 2005.

Upsetting this assumption, the Supreme Court has ruled that Mr Walker’s husband is entitled to a spouse’s pension based on Mr Walker’s full service and, furthermore, stated that the exemption in UK law is incompatible with the European framework directive that the UK law is intended to reflect and must be disapplied.

Does this mean that the effect of the European legislation is retroactive? That depends on what is meant by ‘retroactive’. The Supreme Court ruling noted an argument put forward in a previous European court case that distinguishes between the retroactive application of legislation to past situations (which is generally prohibited) and its immediate effect on an ongoing situation. It commented that “The application of these principles presents a challenge when one is dealing with entitlement to an occupational retirement pension. Conventionally, the right to a pension accumulates over decades.” At what point does a pension become “permanently fixed” and therefore not affected by the introduction of a new equal treatment provision. Historically it has been assumed that the key point is when the pension accrues. All five of the judges ruling on the case found in favour of Mr Walker, and three supported the view that the key date to consider for equality purposes is when the survivor’s pension falls to be paid. Two preferred to leave that specific point to the European Court to decide, in relation to another case, O’Brien v Ministry of Justice which deals with the pension entitlement of part-timers.

In key sex-discrimination judgments, such as Barber, the extent to which the effect of the ruling was backdated was established by a series of cases in the European Court that restricted the effect. The Supreme Court said that it was clear that this was because the effects of not doing so would be “catastrophic”. In effect, it ruled that this doesn’t apply in Mr Walker’s case, unless evidence is presented to the contrary.

Many schemes have already equalised benefits for same-sex partners but not all. In its “Review of Survivor Benefits in Occupational Pension Schemes” published in 2014, the Government Actuary’s Department estimated the cost to the private sector of fully equalising survivor benefits for same-sex couples at £100m. Obviously this is not change you might find in your pocket but compared with other liabilities or potential liabilities it isn’t huge, certainly not enough to qualify as catastrophe. And it is only a quarter of the estimated liability for equalising all survivor benefits including those for widowers. Nevertheless the impact for individual schemes of equalising survivor pensions for same-sex partners, particularly in small schemes, could be significant.

The former Pensions Minister, Baroness Altmann has already suggested that other equality issues could be addressed, for example differences in treatment between widows and widowers. It should be remembered that the specific legislation the Supreme Court said should be disapplied applies solely in respect of sexual orientation. Nevertheless, Mr Walker’s success will undoubtedly encourage those arguing for survivor rights to be equalised in all respects.

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