The Marriage and Civil Partnership (Scotland) Act 2014 became law in March of this year. The Scottish Government has now announced its intention to bring the necessary provisions into force by 16 December this year which would allow for the first same sex marriage ceremony in Scotland to take place on 31 December.
Generally speaking, the Scottish legislation provides that same sex marriages will be treated in the same way as opposite sex marriages. In occupational pension schemes, however, surviving same sex spouses need only be treated in the same way as surviving civil partners and not as opposite sex spouses. This replicates the provisions for England and Wales and 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.
Pension schemes will therefore have to decide what benefits they wish to provide to surviving same sex partners – the statutory minimum or a more generous benefits package. Rule amendments may be necessary and all schemes should consider whether changes are required to insured death in service benefits and/or pension sharing on divorce provisions.
What needs to be done?
Irrespective of whether the statutory minimum or a more generous package is to be offered, 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
As with the legislation for England and Wales, 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
A draft Order by the UK parliament made in connection with the 2014 Act gives trustees the power to amend their schemes by resolution in order 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 2014 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. The Order is expected to come into force on 16 December and any amending resolution should only be signed once the Order is in place.
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 any changes to benefits.
The UK government’s review of the legal position regarding survivor’s pensions for same and opposite sex couples should also be noted. This review considered the abolition of the current exemption (allowing equal survivor’s benefits to be provided (in respect of non-contracted-out benefits) only in respect of pensionable service from 5 December 2005) and the introduction of a requirement to provide equal benefits for all service. The government published a paper in June this year outlining the cost implications for schemes of removing the exemption but a final decision has still not been reached.
My Scheme is governed by English law – what should I do?
Same sex couples have had the right to marry in England and Wales since 29 March 2014. Our previous bulletin covering the position in England and Wales can be viewed here.