Benefits for same sex spouses

The first marriages for same sex couples took place just after midnight last Saturday (29 March 2014).  For pension schemes this means that from now on, following the death of a member who was married under the Marriage (Same Sex Couples) Act 2013 (the “Act”), they will need to consider whether benefits are payable to the member’s same sex spouse.

Occupational pension schemes must provide:

Schemes can provide more if they chose to do so, and in our view it would be difficult for schemes to treat same sex spouses differently to the way they treat civil partners, if civil partners already receive more than the statutory minimum.

The new rules apply to DB and DC schemes in the same way.  But, in practice, most DC schemes will not be providing pensions to survivors on a member’s death, and so the main issue for them will be including the member’s same sex spouse in the group of people they are considering when distributing lump sums on death.

Although for most purposes the Act extends the term “marriage” to cover same sex marriage as well as opposite sex marriage, this does not appear to flow through automatically to occupational pension schemes established before 13 March 2014, when the Act came into force.  (The delay between 13 March and 29 March for the first same sex marriages to take place is due to the requirement to give at least 16 days’ notice of the intention to marry at the local register office).

Schemes should therefore consider changing their survivors’ pension and lump sum death benefit rules at the next appropriate opportunity to make clear how they are administering the new requirements in practice (eg is the scheme providing statutory minimum benefits, or more than this).

Because not all scheme rules will be flexible enough to make the changes, trustees have been given a new power under section 68 of the Pensions Act 1995 to change scheme rules by resolution to reflect the new benefits for same sex spouses.

If trustees want to use this power to provide more than the statutory minimum benefits, however, they will need the consent of the employer.

If no resolution has been passed before the scheme is next amended, schemes should take the opportunity then to include provisions for same sex spouses.  If the scheme is amended without addressing benefits for same sex couples it is arguable it will be treated as a new arrangement, and be brought back within the general principle that “marriage” covers same sex marriage in the same way as opposite sex marriage.  This should not be a problem if the scheme wants to provide exactly the same benefits for same sex spouses as opposite sex spouses, but could stop the scheme providing just the basic level of benefit.

Currently the new law is in force in England and Wales, with Scotland due to follow suit later this year.  But there is no indication at the moment of when the law might be extended to Northern Ireland.

The Government will be conducting a review of the difference in treatment for same sex and opposite sex married couples in respect of pension benefits, and the Act requires a report to be published before 1 July 2014.

In addition, at the end of 2012 an Employment Tribunal decided it was unlawful discrimination to provide lower benefits to civil partners than opposite sex married couples, even though this is specifically allowed under the Equality Act 2010 (see our Alert on the Walker v Innospec decision for details).  This has since been overturned by the Employment Appeal Tribunal (18 February 2014) which concluded that the restriction of benefits in this way is not incompatible with the Equal Treatment Directive (Directive 2000/78/EC).  However, with the Government’s review still pending, it seems unlikely that this will be the final word on same sex spouses’ (and civil partners’) benefits.