On Wednesday 12 July, the Supreme Court ruled that pension schemes should provide equal rights to same-sex couples. This landmark ruling could cost the industry, as some pension schemes may now be facing a multi-billion pound bill to implement this change in legalisation. The new rules rely on EU Equality Laws and it is hoped that the new legislation will be here to stay post-Brexit.
The case was brought to the Supreme Court by Mr Walker, a 66-year-old retired businessman. He demanded the same rights to his pension for his male husband as he would if he was married to a woman. A clause in the Equality Act previously allowed employers to exclude same-sex civil partners and spouses from benefits accrued in pension funds before the Civil Partnership Act came into force in December 2005. This would have left surviving partners with no pension income on the loss of their partner. In contrast, heterosexual couples usually receive at least 50% of the pension value from defined benefit pension schemes for the rest of their lives after their spouse has passed away.
It is an obvious step considering the introduction of same-sex marriage in 2010 – this legislation will ensure same-sex couples enjoy the same pension benefits as heterosexual couples. Welcomed by the human rights organisation, Liberty, this change in rules will affect the lives of thousands of same-sex couples living in the UK and offer a great deal of reassurance. Without the new change in the pension rules, many same-sex couples would have faced huge financial losses on losing their partner. Establishing equal rights will now relieve this burden, ensuring everyone has the same pension benefit entitlement after the death of their spouse.
Although many pension schemes do not discriminate between same-sex and opposite-sex marriages, this is still expected to have big implications for the industry. The Department for Work and Pensions have advised this will require “all pension schemes to equalise entitlements retrospectively” thus costing £100 million for private sector schemes and an additional £20 million for public sector schemes.
If you have been affected by any issues raised in this article, please get in touch to speak to one of our financial planners. We will be able to advise you on how these pension changes will affect you and your partner.