Let’s look at a hypothetical scenario. Mr Smith and Mr Jones join your Scheme on the same day, 5 June 1993. They work in the same job and earn the same pay throughout their careers. Both got married on the same day, 1 May 2015. Sadly, both die on the same day, 1 May 2017. The Trustees look at the Rules for what benefits are payable and agree that that both spouses are entitled to a pension. However this is where things differ…
Mr Smith’s spouse is entitled to a pension of 50% of his pension, based on service from 5 June 1993. Mr Jones’ spouse however is only entitled to a pension of 50% of his pension, based on service from 5 December 2005. How did this happen? Well Mr Smith’s spouse was female and Mr Jones’ spouse was male, meaning the Rules and the interpretation of the equal treatment law – oddly enough it was an anti discrimination provision – allowed this disparity to occur.
This was the situation in which Mr Walker found himself, in relation to his membership of Innospec’s DB scheme. The more than apparent inequity forced him in 2013 to take the matter through the Courts until, last week, the Supreme Court ruled that when considering the anti discrimination point relied on – when discrimination occurs is when the pension becomes payable – that would be when Mr Walker dies and an equal survivor’s pension is denied to his partner. For that reason the Court unanimously found that any survivor’s pension payable to his same-sex spouse should be based on his entire pensionable service, as it would be if he were in an opposite-sex marriage.
In reading the judgement the apparent absurdity for there being inequitable treatment stood out in paragraph 5, which noted:
“If Mr Walker was married to a woman, or, indeed, if he married a woman in the future [my emphasis], she would be entitled on his death to the pension provided by the scheme to a surviving spouse. When the claim was issued, the value of that “spouse’s pension” was about £45,700 per annum. As things stand at present, Mr Walker’s husband will be entitled to a pension of about £1,000 per annum (the statutory guaranteed minimum).”
The law is now clear.
So, as Trustees what actions do we need to take? In practical terms trustees should:
- Check their rules to see if there is different treatment for same and opposite sex spouses. If there is, then this disparity needs to be addressed.
- Whilst It is unlikely that there will be a material impact on scheme funding, speak to your Scheme Actuary to check.
- There may be a requirement for a rectification exercise if any benefits to members have been paid reflecting post 5 December 2005 accrual only.
This is a welcome clarification and rectification of an obvious inequity. Some schemes may of course count the cost of the ruling. Ultimately, however, given the common sense of this decision being plain to see, it was a cost that schemes were bound to experience at some stage. If Mr Walker had not embarked on his journey from the Employment Tribunal in 2013 to the Supreme Court, someone else surely would have eventually.