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Same old sex story

Pensioners&#39 rights for gays, or is it gay rights for pensioners? Over the last couple of weeks I have looked at the ways in which different pension schemes and annuity providers consider the rights of legally married spouses and common law spouses of deceased pension scheme members.

Just how many of these people become entitled to what is commonly called “spouses&#39 pension benefits” but should often more technically be considered under the heading of “dependants&#39 pension benefits”?

We start this week where we left off – Scotland, and that country&#39s unique way in which their courts can declare a couple married in the eyes of the law even if they are not married in the eyes of the church (to simplify a potentially complex principle).

This concept is known in Scotland as “married by habit and repute”. Habit generally describes the length of time the couple have been living together and repute desc-ribes the extent to which the couple has been acting, and being seen as by others, as if they were living as husband and wife.

As a matter of historical interest (at least to the author!) I am told the background to this concept in Scotland started many hundreds of years ago when it was impossible or almost imposs-ible for many people in far flung villages to travel to a church to become married.

So the local sheriffs in Scotland (the equivalent of judges, elsewhere in the UK, and definitely not to be confused with their Wild West namesakes, apparently) were given the power to declare a couple legally married without having to travel vast distances over difficult terrain to the nearest church.

Anyhow, more recently, the concept has been resurrected in connection with inheritance tax planning and it has even more recently become apparent that it may be useful in respect of dependants&#39 pension benefit claims.

The concept of married by habit and repute can, however, only be used in Scotland and can only be considered by the sheriff in respect of couples of opposite sexes.

So, what has all this got to do with the rest of the UK? Well, it is my strong belief that this Scottish concept, or a version of the concept, will in the very near future arrive in the rest of the UK, not perhaps in the first instance for heterosexual couples, but for couples of the same sex.

Couples in this latter category cannot get married in the UK, either in church or in the courts – a fact against which gay activists have been campaigning for many years.

The gay rights issue has entered the pension arena in a big way over the last four or five years, starting with the Inland Revenue&#39s confirmation that it has no fundamental objection to a surviving dependant&#39s pension being payable to a same-sex partner although, as with common-law partners of the opposite sex, only if the survivor is able to show that he or she was financially dependent on the deceased at date of death. This is a requirement which, as I have noted in an earlier article, does not apply to legally married spouses.

However, although the Revenue confirmed that pension schemes and annuities could pay benefits to a surviving same-sex partner, there was and still is no insistence that they must.

The National Association of Pension Funds survey (latest edition, 1999) identifies that, among its occupational pension scheme respondents – covering almost 10 million members and pensioners, and so most certainly an authoritative guide to all schemes – 51 per cent of schemes in the private sector and 84 per cent of public sector schemes refuse to considerpaying pension benefits to asurviving same-sex partner.

The remaining schemes almost universally do not promise to pay benefits to a same-sex partner. As with common-law partners of opposite sexes, they leave the decision, one way or another, to the discretion of the trustees.

The number of schemes at least prepared to consider such payments has risen sharply over the last few years (though, notably, not so much in the public sector) but it is clear that there remains reluctance by most schemes to adopt a more liberal attitude.

This is understandable, of course, because the wider the range of potential beneficiaries a scheme permits the greater the cost to the scheme (and, ultimately, the sponsoring employer) of providing survivors&#39 pensions.

This reluctance, though, has, in fact, been challenged over the years, although usually only informally. The efficacy of such a challenge, if made in the courts, has suffered a blow following the European ruling on the case of Lisa Grant v South West Trains which, although relating to same-sex partners, may have some influence over the claim of common-law partners in its failed attempt to bind trustees to make dependant pension payments to someone other than legally married spouses.

So, what happened with Lisa, what impact has it had on pension schemes in the past and what changes might it drive in the future? Most important, what opportunities have since arisen for financial planning consultants to assist clients in different categories of sexual and legal relationships? Finally, how might all this affect the result of the next general election? Read on.

Let&#39s start with Lisa today, and then conclude this mini-series of articles on sexnext week.

Lisa Grant was an employee of South West Trains and had (and still has, I believe, the relevance or otherwise of this becoming a little clearer later) a lesbian partner who was refused the benefit of concessionary rail travel with that employer, leading to a claim for sex discrimination for a reason which may not immediately be obvious.

South West Trains granted, at that time (in the mid-1990s) concessionary rail travel to married couples and, indeed, to common-law partners of the opposite sex living together. They did not, however, grant such a benefit to lesbian partners and so a claim for sex discrimination was brought before an English tribunal claiming.

Obviously, that it is illegal for an employer to determine the granting, or otherwise, of benefits to employees on the grounds of the sex of each employee. The primary legislation for sex discrimination comes from article 119 of the Treaty of Rome.

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

It was understandable that relatively little interest was stirred by this case due to the seemingly small proportion of the population who would be affected by rights to concessionary rail travel.

It was surprising to many, therefore, that the decision was appealed and went right to the highest court – the European Court of Justice. There, the Prime Minister&#39s wife Cherie Blair helped to represent Ms Grant, a fact I only recount to help demonstrate just how important and high-profile the case had become.

So, why all the fuss about concessionary rail travel forlesbians – with no offence meant against either the quality of rail travel, and espec-ially not against the lesbian community?

Well, the case was – unbeknown to most commentators at the time, and many even since – most notably important not for the rights to concessionary rail travel but for the right to pension scheme benefits. More particularly, the right of surviving homosexual partners to dependants&#39 pension benefits.

Had South West Trains&#39 appeal to the ECJ failed, then much more than concessionary rail travel was at stake. The next – very short – step by Lisa&#39s supporters would undoubtedly been to attempt to rule that pension schemes must, if they pay a spouse&#39s pension to a legally married partner, also pay one to a same-sex partner.

The result, and the conclusion of the real impact on financial planning advice is brought into focus next week.

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