Are your scheme’s death benefits still fit for purpose as regards modern 21st century society?
The Supreme Court considered, in the Brewster judgment, the Northern Ireland Local Government Officers’ Superannuation Committee’s decision not to award Denise Brewster a survivor’s pension after the death of her partner, Lenny McMullan. This was despite a ten year relationship and the couple having bought a shared house together. The reason no survivor’s pension was paid was because Mr McMullan had not completed the nomination form that was regarded then as an absolute requirement imposed on unmarried partners as a condition of eligibility for a survivor’s pension under the relevant regulations of the Local Government Pension Scheme Northern Ireland. These stipulated there had to be a valid nomination of a co-habiting partner to receive a survivor’s pension. This, the judgment noted, led to a number of inequalities – married/civil partners did not have to be living together to benefit in this way from the scheme but co-habiting unmarried partners did; a married/civil partner did not have to be in an exclusive long term relationship established for a minimum of two years for a survivor’s pension to be paid; and a survivor’s pension would automatically be paid to a married/civil partner – no nomination form was needed in their case. The nomination requirement was over cumbersome for cohabitees compared to the requirements imposed on married partners and civil partners and it had been stopped by this public sector scheme going forward as it was deemed to be unnecessary – no further proof of a relationship was needed than satisfying the conditions below.
(a) A is able to marry, or form a civil partnership with, B;
(b) A and B are living together as if they were husband and wife or as if they were civil partners;
(c) neither A nor B is living with a third person as if they were husband and wife or as if they were civil partners; and
(d) either B is financially dependent on A or A and B are financially interdependent.
The Supreme Court noted a lack of a nomination form was likely to result in disputes where all other criteria have been met and there were no policy objectives to having the nomination procedure. Additionally the nomination has no effect if the other statutory conditions have not been satisfied and a mere nomination itself is not sufficient if those statutory conditions have not also been satisfied.
The Supreme Court also comments, although the right to a pension might not be regarded, in conventional terms, as a possession, it is something the applicant can argue that he has at least a “legitimate expectation” of obtaining effective enjoyment of a property right….and that, in this case, the interference with the appellant’s right to property had not been “objectively justified”.
The appellant, as a person who was in a cohabiting relationship other than a marriage or a civil partnership at the time of her partner’s death, enjoyed a relevant status such that her enjoyment of the rights and freedoms shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status. The appellant and Mr McMullan had chosen not to marry for the ten years that they lived together (although they had decided to change that situation shortly before he died) so the appellant’s status was one which she chose and not one with which she was born or which she could not avoid. However this did not result in a change of approach by the Supreme Court as regards the imposition of the nomination requirement. Changes were, for example, made to the public sector pension scheme to secure equal treatment and to comply with obligations under European Convention on Human Rights and the Human Rights Act 1998 and to bring that scheme in line with the position in England and Wales, with no thought given to possible difficulties with administration that might arise if the nomination procedure was not included when changes were made to put in place the new scheme.
The Supreme Court decided the requirement for Mr McMullan to have made a nomination was disapplied and he was entitled to receive a survivor’s pension under the public sector scheme.
This judgment is important for public sector schemes as the human rights obligations are directly applicable. It is not so immediately transferrable into the arena of private sector schemes unless, for example, they are required to replicate public sector schemes. However it does highlight the difference in treatment that can be hard to justify in private sector schemes as regards the treatment of married and unmarried couples, and even as regards the different treatment of married couples themselves within the same scheme. Often, for example, a spouse’s pension is not payable to a widow or widower if the couple married after the member left pensionable employment and the rationale for this can be difficult to explain on the death of an individual. Poor quality death benefits can be one reason why members decide to transfer out their DB pensions to a DC pension arrangements. There is therefore something to be said for reviewing private sector schemes’ death benefits and checking they are still fit for purpose as regards modern 21st century society.
Pensions Law Update - April 2017
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