In a ground-breaking decision that will delight and distress in equal measure, the Court of Appeal has given some long-awaited guidance about the extent of survivor benefits to be provided by pension schemes on the death of a same-sex partner or spouse.
Our last full comment on the Walker v Innospec case was published in our February 2013 Bulletin, shortly after the Employment Tribunal decision of December 2012. Since then we have been keeping you updated as to the development of this case in our "Ready Reckoner".
The Court of Appeal has now handed down its judgment following the hearing in June.
The facts – a recap
Having joined his employer's pension scheme in 1980, Mr Walker entered into a registered civil partnership in January 2006 (he has subsequently married his partner).
Following the introduction of registered civil partnerships the scheme Rules were altered, on 1 August 2006, in accordance with the Equal Treatment Framework Directive to provide survivor pensions limited to the member's future service from 5 December 2005 (or, in the case of contracted-out benefits such as GMP, from 6 April 1988).
Under the Scheme Rules Mr Walker's surviving partner would only be entitled to a pension of £500 per annum, being 50% of his GMP, upon Mr Walker's death. When comparing this amount against a survivor's pension calculated on Mr Walker's full service (such as an opposite-sex spouse would receive), which would have been in the region of £47,500 per annum, it is not entirely surprising that a challenge was brought.
Mr Walker wanted to ensure that his partner would be entitled to a pension based on his full service, rather than simply to the extent required by the UK registered civil partnerships legislation. He claimed that this different treatment, on the grounds of sexual orientation, was a breach of the Equality Act.
Decisions, decisions...
The Employment Tribunal decided the full service approach was consistent with the EU Directive and should be applied. The Tribunal declined to impose any temporal limit, such as the 1990 backstop applied to equalisation claims by the ECJ decision in Barber, and found that evidence about the financial impact on the scheme was insufficient to justify the discrimination.
The Scheme and its employer challenged this judgment, which had unsurprisingly caused a certain degree of consternation within the industry.
The case went first to the Employment Appeal Tribunal (EAT) in February 2014, where their appeal was allowed.
Mr Walker then appealed the EAT's decision.
The Court of Appeal
The Court of Appeal's conclusion focused on the functionality of European law:
- it only has effect in relation to the future unless it expressly provides otherwise; and
- where European law is introduced it can only apply to the situation as it existed under the old law.
Accordingly, the provisions of the Equal Treatment Framework Directive were not capable of giving Mr Walker's same-sex spouse an entitlement to benefits based on pensionable service prior to the introduction of the relevant laws. The Court therefore found that the scheme could not be obliged to pay Mr Walker's spouse a pension based on benefits accrued before 5 December 2005.
WB comment
The rights or wrongs of the decision, and of imposing many billions of pounds of additional liabilities on the pensions industry with retrospective effect, can (and probably will) be debated until the cows come home. By contrast the decision itself is likely to result in a collective sigh of relief from employers and trustees alike, for whom – after a lot of waiting – there is at least now some certainty as to the extent of their obligations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
