Pensions victory for same-sex couples

A Supreme Court victory for a retired businessman who argued that the UK’s pensions legislation discriminated against same-sex couples paves the way for thousands of gay couples to claim improved retirement benefits. Under the Equality Act, it is illegal for pension schemes to discriminate against gay couples over how benefits are passed on to a surviving spouse after the death of a member of the scheme. However, the law included an exemption that allowed employers to exclude civil partners and spouses from benefits accruing from pension contributions made before 2005, when the Civil Partnership Act came into force.

In John Walker’s case, the exemption would have allowed his former employer to offer his husband just £1,000 worth of pension benefits per year following his death. By contrast, were Walker married to a woman, the spouse’s pension would be worth around £45,700 per year. This contravened European Union (EU) laws on equality, said the Supreme Court, who ruled unanimously in Walker’s favour, effectively removing the exemption from the Equality Act. All pension schemes will now have to review their rules, to ensure they cannot be challenged in the same way.

The government had supported Walker’s former employer in the case, with the Department for Work and Pensions having previously estimated that getting rid of the exemption would cost pension schemes as much as £3.3bn. A large chunk of that bill – possibly as much as £3bn – would fall on public-sector pension funds, warned ministers. However, Liberty, the civil-liberties group that brought the case on behalf of Walker, argued that the exemption was a straightforward breach of human-rights laws and an EU directive on equal treatment. It also called for the government to legislate to protect couples helped by the ruling from any further challenge to their rights following Brexit.

Lawyers are also now considering whether people previously affected by the exemption could be entitled to make retrospective claims for benefits on which they missed out. It is not known how many same-sex spouses of pensioners who died prior to the ruling have been affected by the exemption, but anyone who has lost out in this way may now be able to make a legal challenge.

Beware of the common-law myth

The legal battle over same-sex pension inheritance rights is another example of how the UK’s tangled laws on inheritance can catch people out. Couples who remain unmarried – whether gay or straight – are at the greatest risk, because contrary to widely held opinion, the UK’s legal system does not recognise “common-law” partners. As a result, people living together outside of marriage or a civil partnership do not automatically benefit from the same inheritance rights.

In the case of pensions, this could mean that an occupational pension scheme refuses to pass on benefits to a member’s partner on their death, even where the member has expressly nominated their partner as their chosen recipient of benefits.

More broadly, unmarried couples do not automatically inherit each other’s assets when the first partner dies. Where one partner dies without a will in place, their assets will pass to their children, or to other close relatives, according to the UK’s laws on intestacy, with the surviving partner not entitled to anything. This can even include the partner’s property – even if it’s the couple’s home – if joint ownership has not clearly been established.