Same sex marriage and pensions: England and Wales

Same sex couples will have the right to marry in England and Wales from 29 March 2014. Pension schemes governed by English law will need to decide what benefits they will provide to surviving same sex partners and consider what scheme amendments are necessary to achieve this.

11th March 2014

Same sex couples will have the right to marry in England and Wales from 29 March 2014. Generally, same sex marriages will be treated in the same way as opposite sex marriages. However, in occupational pension schemes, surviving same sex spouses need only be treated in the same way as surviving civil partners and not as opposite sex spouses. This means that equal survivor’s benefits only need to be provided (in respect of non-contracted-out benefits) in respect of pensionable service from 5 December 2005.

Schemes governed by English law will need to decide what benefits they will provide to surviving same sex partners – the statutory minimum or a more generous benefit – and consider what scheme amendments are necessary to achieve this. Defined benefit schemes, including those closed to future accrual, are most likely to need to act, though all schemes should consider if changes are required to insured death in service benefits and/or pension sharing on divorce provisions.

What needs to be done?

We would recommend that schemes adopt the same benefits for surviving same sex spouses as they have for civil partners. This will avoid complications should a member who is already in a civil partnership choose to marry and also any potential discrimination claims arising from the difference in treatment between civil partners and same sex spouses.

Providing the statutory minimum: equal benefits from 5 December 2005

The statutory minimum is overriding and so amendments are not strictly necessary to ensure compliance – trustees will be required to pay the benefit regardless of the terms of the scheme’s governing documentation. As a matter of good practice, amendments should however be made so that the benefits payable are clear from the face of the documentation.

Providing a more generous benefit

Schemes may wish to provide surviving same sex spouses with equal benefits for the full period of pensionable service, particularly where this is already provided for civil partners. If this is the case, rule amendments will most likely be necessary (though it may be possible to use the existing augmentation power in individual cases).

Contracted-out benefits

For contracted-out benefits, a surviving same sex spouse must receive the same as a widower, i.e. 50% of the GMP accrued after 5 April 1988 and 50% of the reference scheme pension for pensionable service from 5 April 1997. The statutory minimum for contracted-out benefits is not overriding and so amendments will most likely be needed for contracted-out schemes.

Making the necessary amendments

Regulations made in connection with the 2013 Act gives trustees power to amend their schemes by resolution to permit them to treat same sex spouses in the same way as opposite sex spouses. No employer consent is required unless the resolution confers on same sex spouses rights greater than those conferred by the 2013 Act (e.g. equal non-contracted-out benefits in respect of all pensionable service) and there is no need to comply with section 67 of the Pensions Act 1995, which prevents amendments detrimentally affecting members’ subsisting (i.e. accrued) rights.
 
What else do I need to think about?

Schemes should consider any necessary amendments to their pension sharing on divorce provisions and also to their scheme booklet and expression of wish/nomination form. Members should be notified of changes to benefits.

Schemes should also bear in mind the ongoing government review of the legal position regarding survivor’s pensions for same and opposite sex couples. The review is expected to conclude in July 2014 and a possible outcome is the abolition of the existing exemption and a requirement for schemes to provide equal benefits for all service and not just that from 5 December 2005.

My scheme is governed by Scots law - what should I do?

The legislation in Scotland is not yet finalised and we would recommend that schemes wait until this is in place before making any amendments. We will report on the Scots law position in due course.