Pensions Update: Landmark Ruling Points The Way Forward For Pension Schemes in Ireland
In July 2017, the UK Supreme Court unanimously ruled in Walker v Innospec Limited & Others that an exemption in the UK Equality Act 2010 is discriminatory and in breach of EU equality law. The exemption allows pension schemes to exclude same-sex partners from benefits paid into pension funds before December 2005.
The Court noted that this exemption infringed EU Directive 2000/78/EC which requires Member States to prohibit discrimination in employment on various grounds including sexual orientation.
What does this ruling mean?
The ruling means that the provision in the UK Equality Act 2010 is immediately dis-applied and any pension schemes that continue to take advantage of the exemption are doing so unlawfully.
Occupational pension schemes in the UK must now respond to the judgment and provide civil partners and same-sex spouses with the same survivors’ benefits as opposite sex married couples.
The Court referred to two EU decisions which confirmed that unless providing a survivor’s pension for his husband would result in unacceptable economic or social consequences, there was no reason that he should be subjected to unequal treatment as to the payment of that pension.
The Court concluded that Mr Walker’s husband is entitled on Mr Walker’s death to a spouse’s pension. This would be calculated on the basis of all the years of Mr Walker’s service with Innospec, provided he does not die before his husband, and provided that they remain married up to the point in time of Mr Walker’s death.
Since 1 January 2011, the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010provides that it is discriminatory for pension schemes to treat same-sex partners less favourably in the context of death benefits.
As was stated in the landmark case Parris v Trinity College Dublin, EU law did not require Ireland to legislate for same sex marriage or partnerships before 2011. The case also highlighted that Ireland was not required to give retrospective effect to the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 and, as such, the provisions of the Act could not be applied prior to 1 January 2011. Any pension rule that required partners to be married or in a civil partnership when retiring, even if they were not legally able to marry or enter a civil partnership at this time, was held not to be discriminatory.
Implications for the Republic of Ireland
- This case may be cited as persuasive authority before Irish courts in future similar cases.
- The judgment suggests that a review of the detailed terms of pension schemes concerning civil partners and same-sex couples may be timely for Irish pension providers.
- Should a similar judgment be handed down in the Republic of Ireland, occupational pension schemes that currently restrict survivors’ benefits for civil partners and same-sex spouses to post 2010 accrual may need to be amended to bring these benefits into line with those for opposite-sex married couples.
- Pension schemes should provide same-sex survivors' benefits based on a member's entire period of service. Accordingly, as equal treatment in pension schemes would have to be applied retrospectively, there will be cost implications. The Department for Work and Pensions in the UK has estimated that this could amount to an additional £100 million of liabilities for private sector schemes and £20 million for public sector schemes.
The outcome of this case is clearly significant for members of pension schemes in the UK who have entered into civil partnerships or same-sex marriages.
Its potential implications for Ireland are also considerable. It was anticipated that the Social Welfare Pensions and Civil registration Bill 2017 would be amended to apply equal survivor’s pension entitlement to a civil partner or same sex spouse. The relevant sections of the Bill have been dropped at the Second Stage of Parliamentary debate, however, it is still possible that it will come in at a later stage or be contained in separate legislation.
With the possibility of statutory intervention or a similar ruling of the Irish Courts likely in the future, pension providers may need to review schemes to provide the same benefits for civil partners and same-sex spouses as they do for opposite sex spouses.
Employers and trustees should carry out a review of their scheme documentation to ascertain if the UK ruling and upcoming Irish legislation could impact their pension schemes. Action taken now could reduce any future negative consequences.
Source : https://www.lexology.com/library/detail.aspx?g=dd47ebfb-5b50-4d7f-93ff-c552b3e2c7fe