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Pensions at a junction on discrimination – Keith Popplewell

Following my earlier articles relating to pensions for homosexuals and transsexuals, I have had a number of readers contact me to ask on what information my articles were based. So, as an interlude to my current series on recent and imminent developments in the pension world, this piece looks back over the history.

Lisa Grant was an employee of South West Trains and had a lesbian partner who was refused the benefit of concessionary rail travel with that employer, leading to a claim for sex discrimination.

South West Trains granted concessionary rail travel to married couples and, indeed, to heterosexual partners who were living together but not legally married. It did not, however, grant such a benefit to lesbian partners and so Grant’s claim for sex discrimination was brought before an English tribunal.

The tribunal decided that this was, indeed, a case of sex discrimination and found against South West Trains.

It is understandable that relatively little interest was stirred by this case, probably due to the small proportion of the population who would be affected by rights to concessionary rail travel. However, the case was most notably important in connection with rights to pension scheme benefits.

Big occupational pension schemes such as that operated by South West Trains almost invariably grant a pension to the surviving spouse of a deceased scheme member.

Historically, such a benefit has only been offered to legally-married partners although, more recently, an increasing number of schemes have – invariably at the discretion of the trustees – have granted such a pension to surviving partners of the opposite sex, where that partner can show some elements of financial dependency on the deceased.

In fact, it is an Inland Revenue requirement that where it is proposed to pay a survivor’s pension to someone other than the deceased’s legally-married spouse or a dependent child, the pension scheme must ensure that the claimant was financially dependent on the deceased at the date of his or her death.

The onus is on the pension scheme – whether an occupational pension scheme or a pension payable from a pension annuity with an insurance company – to obtain evidence of this dependency. I am aware that many schemes and insurance companies are perhaps a little lax in obtaining this proof but readers must be aware that the requirement exists and may result in refusal to pay a survivor’s pension where no such proof is available.

As regards the practice of schemes to make payments to non-spouses only at the discretion of the trustees, a few seconds’ thought will demonstrate that it could not be otherwise. If the scheme rules permit payments to, say, common-law spouses, the reader should be aware that there is no definition in law of a common-law spouse. How long do the couple have to live together to be deemed to be common-law spouses? There is no answer, either in legislation or in legal precedent.

Thus, trustees must use their discretion in determining whether to pay such a claimant, taking into account a number of factors including the period of cohabitation, joint financial commitments such as a mortgage and whether the couple have children.

Scottish readers will no doubt be aware of the “married by habit and repute” procedure whereby, to almost all intents and purposes, the courts may deem a couple to be (or have been, as the judgment can be made retrospective) married, even where no formal ceremony has ever taken place.

It is important to note, however, that schemes are not obliged to include a surviving spouse’s pension as part of the benefits although this is almost invariably a major part of scheme design. More important, even where schemes offer a surviving spouse’s pension, they are not obliged to extend that benefit to partners not legally married to deceased scheme members.

Although most schemes are now prepared to consider paying a survivor’s pension to established partners of the opposite sex, only a minority will consider paying such a pension to established partners of the same sex. However, the number of schemes which are prepared to consider such payments (or, to be precise, authorise the trustees to consider such payments) is increasing quite rapidly.

As with unmarried partners of the opposite sex, the Inland Revenue will only permit a survivor’s pension to be payable to a same-sex partner if that person can demonstrate financial dependency on the deceased at the day of his or her death.

At the time of the Grant judgment more than two years ago, South West Trains not only would not grant concessionary rail travel to Grant’s partner but would also not permit the trustees of the pension scheme to consider paying a survivor’s pension to that person. (It is worthy of note that all the rail operating companies, including South West Trains, have recently announced that they will now permit trustees to pay such a pension to a surviving same-sex partner).

If Grant could show that South West Trains ought not to discriminate against same-sex partners and must therefore, as the English tribunal decided, grant concessionary rail travel to such partners where this benefit was offered to legally-married spouses, then it would be a very short step to forcing employers’ pension schemes to offer a surviving same-sex partner’s pension where such a pension was offered to legally-married partners.

Thus, interest in the Grant case extended far beyond the realms of concessionary rail travel. The implications for schemes were huge. Providing surviving partners’ pensions to homosexual partners would be very expensive.

Pension schemes were concerned that if they were forced to offer this benefit to an extended range of potential beneficiaries, the question would regularly arise as to whether a claimant was, indeed, a partner of the deceased scheme member to the extent required to qualify them for benefits under the pension scheme. Just how long must the couple have been living together? Should the trustees seek evidence of joint financial commitments?

The case was referred to the European Court of Justice, which considered the claim for sex discrimination under Article 119 of the Treaty of Rome. This court overturned the decision by the English tribunal and found in favour of South West Trains. Pension schemes breathed a huge sigh of relief.

Why did the European court overturn the English tribunal’s decision? They explained that Article 119 of the Treaty of Rome related to discrimination between males and females. South West Trains did, indeed, exclude homosexual female partners from benefits but it also excluded homosexual male partners and so did not discriminate between males and females, treating both male and female homosexual relationships exactly the same by excluding them from benefits. The discrimination by South West Trains was not between males and females but between heterosexuals and homosexuals.

The term sexuality discrimination has been coined to describe discrimination which does not contravene either Article 119 of the Treaty of Rome or any other articles or legislation within the European Community or, for that matter, any legislation in the UK. Thus, Grant’s claim for sex discrimination could not, and ultimately did not, succeed. That remains the situation.

In conclusion, it is perfectly acceptable in law to discriminate between homosexuals and heterosexuals in the provision of benefits by an employer, in particular, pension scheme benefits. However, a report commissioned by the Government, following the Grant decision, has recommended that serious consideration be given to the introduction of new legislation in this country making sexuality discrimination illegal. In particular, the report addressed the situation regarding pensions, as I have been discussing, and recommended that schemes offering a surviving spouse’s pension should also be obliged to pay a survivor’s pension to same-sex partners and (by definition although this was not particularly detailed) common-law partners.

The Government has not publicly responded to this report and recommendation, presented in 1999, but schemes again wait anxiously.

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