UK: Court Of Appeal Rules On Survivor's Benefits For Same Sex Married Couples

Background

From 5 December 2005 civil partnerships were introduced, giving same-sex couples legal recognition and rights and obligations similar to those of married couples.  For occupational pension schemes an overriding non-discrimination rule was introduced requiring schemes to treat survivors of civil partnership in the same way as a survivor of an opposite sex marriage, but only for pensionable service from 5 December 2005 and for contracted-out rights accruing post April 1988¹. 

Having retired from Innospec in 2003 and entered into a civil partnership in 2006, Mr Walker wanted to ascertain the amount of survivor's pension that his civil partner would receive in the event of his death under the company's pension scheme. However because all of Mr Walker's pensionable service pre-dated 5 December 2005, his partner would only receive a very small proportion based on his contracted-out rights  

The Employment Tribunal upheld Mr Walker's complaint, finding that the Innospec pension scheme trustees had unlawfully discriminated against Mr Walker, both directly and indirectly on the grounds of his sexual orientation. 

However on appeal by Innospec the EAT overturned the first instance decision. It was held that the partial exemption from the requirement to equalise, enacted in the Equality Act 2010, was valid and further that this exemption was compatible with the EU Framework Directive ("the Directive"). The EAT also ruled that the Directive did not have retrospective effect  in relation to inequalities which arose on the basis of sexual orientation before the date the Directive was required to be transposed into national law (1 December 2003). Therefore the requirement to equalise does not apply to pensionable service before 2005. Accordingly there was no unlawful discrimination. 

For further detail relating to the Employment Tribunal's and EAT's decisions see our brief dated 11 March 2015 Pensions and same sex relationships: the Marriage (Same Sex Couples) Act 2013 and EAT decision in Innospec v Walker. 

Appeal 

Mr Walker appealed the EAT's decision and the Court of Appeal has rejected his appeal on the following grounds: 

• EU legislation cannot have 'retroactive effect'².  At the time when Mr Walker earned the entitlement to his pension benefits (1980-2003), the discriminatory treatment now complained of, was lawful. The Court agreed with the EAT, that his entitlement to those benefits must be judged by reference to the European law that was in force at the time of his service. As Mr Walker retired on 31 March 2003, he ceased to accrue pension rights before the change in UK law in 2005. Consequently the exemption under the Equality Act 2010, applying to pre-2005 service, was deemed to be valid. Lord Justice Lewison emphasized this point when he said that 'to interpret paragraph 18 so as to allow the claim to be made would be to make new law which Parliament has plainly rejected'. 
• Further it was held that the 'future effects' principle did not apply³. The EAT was correct to conclude that because pension rights attributable to a period of service are acquired definitively during that term, a member's entitlement to any accrued benefits is definitively fixed on expiry of that term. Therefore it was decided that Mr Walker's entitlement to a pension was permanently fixed as he earned it, and ceased to accrue further benefits when he retired in 2003.

Mr Walker's entitlement must therefore be judged by reference to the EU Law in force at the time of his service. The exemption under the 2010 Act was deemed to be lawful and the trustees of the Innospec occupational pension scheme were under no obligation to take into account civil partners' survivor benefits accrued before the introduction of civil partnerships on 5 December 2005. Mr Justice Underhill aptly summarised the position in his concluding judgment, providing that 'changes in social attitudes, and the legislation which embodies those changes, cannot fully undo the effects of the past'. The Court of Appeal also rejected the need to refer the case to the European Court on the grounds that the law was sufficiently clear.

Clyde & Co Comment

This is unlikely to be the end of the story, At the time of writing, it remains to be seen whether this will be appealed to the Supreme Court. 

The Government considered last year the treatment of survivor's pensions for same sex and opposite sex relationships.  However, as the costs of eliminating the remaining differences in survivor benefits was around £0.4 billion in the private sector and approximately £2.9 billion in the public sector, the idea of further legislative change appears to have been quietly dropped.

But the TUC have said that the decision is a 'real disappointment', as it upholds one of the 'last remaining obstacles to true equality' for same sex couples. The TUC emphasised that it was more than a year ago since the Government review reported on the ongoing discrimination in survivor pensions, yet ministers have done nothing in response. It would seem therefore that the political pressure for a change will continue. 

Some schemes have already decided not to make any distinction between same sex and opposite sex couples. We suspect that full equality is coming, the only question is when.  

1  This rule is now found in the Equality Act 2010 and now applies to same sex marriages. 
2  The principle of 'no retroactivity' means that conduct which was lawful when it occurred cannot be retrospectively found to be unlawful. 
3  The 'future effects' principle provides that amending EU legislation applies immediately to the future effects of a situation  which arose under the law as it stood before amendment, unless specifically provided otherwise. 

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