I'm still standing - survivor benefits
The Equality Act 2010 (Amendment) Equal Treatment by Occupational Pension Schemes) Regulations 2023 affect occupational pension schemes and they are due to become law before the end of 2023.
Penny Cogher and Harriet Fletcher explain the impact of this new legislation:
No amendments are required to scheme rules to reflect the Regulations as the changes are deemed to be overriding. However trustees and employers will have to decide whether, in practice, they do need to make any tweaks to how they administer their schemes because of the new Regulations. It is only likely to be tweaks as the Regulations aim to codify the right to equal pay (Regulations 2 and 3) and the right to non-discrimination on grounds of sexual orientation as regards employment and occupation (Regulation 4) into our domestic law.
The Regulations represent a tidy up of UK occupational pension scheme law arising from the ongoing impact of Brexit.
Further detail
The Regulations were approved by Parliament on 22 November and are due to become law before the end of this year. They make two “changes” to occupational pension schemes and these changes feed through into changes to the compensation provided by the Pension Protection Fund (through changes to the Pensions Act 2004). They are being implemented quickly as retained EU law will cease to have legal effect in UK domestic law after 31 December 2023.
The Government regards the Regulations as codifying, in respect of occupational pension schemes, to a limited extent, the right to equal pay through the effects of Article 157 of the Treaty on the Functioning of the European Union and of the right to non-discrimination on grounds of sexual orientation as regards employment and occupation established by Council Directive 2000/78/EC establishing a general framework for equal treatment in employment and occupation. The effects to be codified form part of domestic law through section 4 of the European Union (Withdrawal) Act 2018.
Because the Regulations are regarded as codifying, rather than “changing” our law, no, or no significant, impact on private, voluntary or public sector pension arrangements is foreseen and so there has not been a full impact assessment produced for the Regulations.
What do the Regulations actually mean for schemes?
The Regulations remove the statutory exemption that restricted the benefits to be paid to a surviving civil partner on the death of a scheme member to the benefits which the member had accrued from 5 December 2005 onwards. This is the case for all occupational pension schemes, not just contacted out schemes. This means that surviving civil partners must be treated in the same way as surviving spouses for the whole period of their pensionable service. Many schemes already administer their schemes in this way anyway to comply with the case law.
The Regulations remove the statutory exemption that restricted the contracted-out benefits to be paid to a surviving civil partner on the death of a scheme member to the benefits which the member had accrued from 6 April 1988 onwards. This date was when contacted out occupational pension schemes first had to provide a GMP widower’s pension. However the contracting-out legislation gives all civil partners the same GMP entitlement as widowers creating an anomaly for surviving female civil partners in both same-sex and opposite-sex civil partnerships (section 17(4) of the Pension Schemes Act 1993). This means that in these cases, the GMP benefit is only 50% of the GMP earned by the deceased member on and from 6 April 1988. There is therefore still not full equality here in these types of circumstances.
Why now?
The Regulations restate the outcome of two cases, Allonby and Walker v Innospec Ltd and are necessary because retained EU law will cease to have effect in domestic law after 31 December 2023.
In Allonby, the ECJ held that a notional opposite sex comparator may be used in an equal pay claim.
In Walker v Innospec Ltd the Supreme Court disapplied the legal exemption that permitted a scheme to restrict to periods completed from December 5, 2005 the pensionable service that could be taken into account in calculating survivor benefits for same-sex partners.
Therefore, benefits payable to same-sex surviving spouses and civil partners should be calculated on the same basis as for opposite-sex spouses and civil partners.
Currently, the Equality Act 2010 (Schedule 9, part 3, paragraph 18) does not reflect the Supreme Court’s decision in Walker v Innospec Ltd. The Regulations change that.
All occupational pension schemes are deemed to contain an overriding non-discrimination rule under section 61 of the Equality Act 2010 and so schemes are not formally required to amend their scheme rules to comply with it however in practice most do so. The Regulations do not change this.
The Regulations are made under the restatement powers in the Retained EU Law (Revocation and Reform) Act 2023 (REUL Act), which allows "secondary retained EU law" (including directly effective EU Treaty rights) to be restated in regulations. This also allows a restatement to use different words or concepts from those used in the original law to resolve ambiguities.
How do the Regulations make the changes?
Regulations 2 and 3 relate to occupational pension schemes that are contracted out on a Guaranteed Minimum Pensions (GMPS) basis.
The Regulations codify the right to equal pay to allow a notional (rather than actual) opposite sex comparator to be used in certain circumstances to establish the existence of discrimination caused by legislation. This is nothing new and reflects the well-known legal principle which was established in the 2004 case Allonby v Accrington and Rossendale College and others.
The Regulations implement this in respect of GMPs by modifying provisions relating to the terms of a person's work, or the rules of an occupational pension scheme of which they are a member, to ensure that those functions, terms and rules do not, in relation to pensionable service on and after 17th May 1990 (ie the date of the Barber judgment) discriminate on the grounds of sex where, as a result of legislation on GMPS, a person would otherwise be subject to less favourable treatment compared to a person of the opposite sex.
These changes apply to both occupational pension schemes through the amendments to sections 64, 66 and 67 of the Equality Act 2010 and also to the compensation provided by the PPF though amendments to the Pensions Act 2004.
Regulation 4 codifies the right to non-discrimination on grounds of sexual orientation as regards employment and occupation. This principle was established by the Framework Directive and was tested in the UK 2017 by the Supreme Court’s decision in the Walker v Innospec Ltd and others case.
The Regulations amend paragraph 18 of Schedule 9 to the Equality Act 2010 to ensure that that paragraph does not apply in respect of access to benefits payable to the surviving spouse or civil partner of a deceased member or pension credit member of an occupational pension scheme.
Commentary
These are complicated areas of law, where trustees and employers should take specialist bespoke legal advice to ensure their schemes are and remain compliant.
How we can help
For advice about this or any other pension issue for your business, please contact the team or contact Penny directly.
