The first same sex marriages will be able to take place on 29 March as the majority of the provisions for marriage between same sex couples* came into force on 13 March this year. However if one of the parties to a same sex marriage is a member of an occupational pension scheme and sadly dies, his or her new spouse may receive less than they bargained for…
Occupational pension schemes will now be required to pay same sex surviving spouses the same benefits as are payable to civil partners. However, this does not mean that they are entitled to receive the same benefits as opposite sex surviving spouses.
In schemes where death benefits are calculated according to the member’s length of pensionable service, rather than as a multiple of the member’s final salary, survivors’ benefits must be paid to same sex surviving spouses based on a minimum of the late member’s rights built up since 5 December 2005. If the scheme is contracted out of the State Second Pension, death benefits must be based on a minimum of rights built up since 5 April 1988. Schemes can choose to pay same sex surviving spouses (and civil partners) the same benefits as they pay to opposite sex spouses (ie based on the whole of the spouse’s pensionable service in a scheme), but they do not have to.
Isn’t this discrimination?
During the Parliamentary debate before the provisions were passed, questions were raised about the legality of allowing opposite sex spouses to receive death benefits based on the whole of their spouse’s pensionable service in a scheme, while allowing the death benefits payable to same sex spouses (and civil partners) to be restricted. As a result, the Government is conducting a review of the position. The report is due to be published by 1 July this year.
What will the report say?
Interestingly, the Employment Appeal Tribunal has recently, held that it is lawful to restrict survivors’ benefits payable to a civil partner in a recent case**. It said that the payer was not legally obliged to remedy past discrimination which was lawful at the time the benefits accrued, just because it has become unlawful by the time the pension comes into payment.
However, we would not be surprised if the Government does change the law and removes the permitted restriction on same sex survivors’ benefits. Many schemes have not retained the restriction for civil partners, so it is likely they will do the same for same sex spouses. Keeping the restriction does not fit well with the principle of equality. Also, the Government has calculated that the cost to UK schemes of removing the restriction would be £18 million – not a huge figure when put into context.
What do employers and scheme trustees need to do?
It’s difficult to know the full extent of employer and trustee obligations until the Government’s report has been published. In the meantime, changes should be made to scheme documents. The requirement to pay contracted out death benefits to a same sex surviving spouse will not override the scheme rules. However the requirement to pay other death benefits will be overriding.
Views differ as to whether the amendments should be made before 29 March 2014 or not. In our view, it would be sensible to make the amendments as soon as possible but be aware when drafting that if you are making use of the available restrictions, these may be removed in the summer!
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*Marriage (Same Sex Couples) Act 2013
**Innospec -v- Walker