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Yours for the asking

In my last article, I looked at the intriguing case of Goodwin, the latest in a long stream of sex and sexuality discrimination rulings from Europe. But other recent legislation and rulings from our friends on the Continent may prove at least as costly to pension schemes – and as valuable to potential members.

I have commented in previous articles about the situation relating to part-time employees now being able to claim membership of an employer-sponsored scheme backdated to 1976. Over the last couple of years, various tribunal rulings have clarified many of the points of contention for different categories of part-timers but a spin-off issue has now come to the fore – the rights of fixed-term employees.

Almost invariably, fixed-term employees have been denied access by their employer to membership of a company pension scheme, not least because of the huge cost of funding benefits for potentially huge numbers of people who might spend only a few months or years with an employer.

However, following Europe&#39s fixed-term work directive, the recent UK fixed-term employees regulations require that, from October 1 this year, employees on fixed-term contracts must be given equal employment rights with their permanent colleagues. This includes pension rights.

Fundamentally, this issue arose after it was shown that there are significantly more females than males in the part-time workforce, meaning that discrimination against part-timers represents discrimination against females, albeit indirectly. Similarly, as there are significantly more females than males in the fixed-term workforce (which includes most temporary workers but not agency workers), discrimination against this category of employee also represents discrimination against females. This line of argument has now been enshrined in the aforementioned regulations, meaning that fixed-term employees have become entitled to equal employment rights.

Yet, as with part-timers, it seems likely that many employers will continue to exclude fixed-term workers from eligibility to pension scheme membership, either out of ignorance of the new regulations or in the almost certain knowledge that few of these employees will be aware of their new rights.

This presents an excellent opportunity for financial advisers to add value to the financial lives of a huge number of people, either directly or through local trade unions.

You may consider that few of your clients are on fixedterm contracts but think again. Recent examples of my own clients include supply teachers, professional sportspeople, software developers and contracted managers and executives. Specifically excluded, however, are students on placement, apprentices and members of the armed forces. Moreover, casual workers not under contract, for example, seasonal and casual farm workers, will also not benefit from this directive. This still leaves a huge number of beneficiaries.

So where does this leave us? I think it would be well worth summarising areas of pension planning which have been largely overlooked by most financial advisers.

First, part-timers. It is a myth that all potential claimants have now been dealt with. Newspaper reports that 60,000 claims have been lodged by the trade unions are pretty much accurate and most have been successfully resolved. But hundreds of thousands of other claimants should now come forward, particularly after some disputed points have now been settled. The trade union for high-street bank employees has negotiated a pro-active search for eligible claimants, as have a couple of supermarket chains, but mostly the situation remains that if you don&#39t ask, you don&#39t get.

As an example, a recent client (actually, the mother of an insurance company&#39s broker consultant, so we did this one as a favour) has now been offered an ex gratia payment in excess of £100,000 in lieu of a pension claim for her part-time work for a major charity. She is in her early 60s and this kind of money is highly significant to her future lifestyle but – and I cannot stress this enough – if she had not asked, she would not have got. Added value or what?

Next, homosexuals. Soon, schemes will not be able to discriminate against homosexual partners of scheme members although quite how trustees will be able to verify the validity of these relationships is a concern. Quite simply, most trustees have not got the time or energy for questions about the period of time of the relationship, financial dependence or interdependence and the existence of dependents.

Again, it will often be the case that if you don&#39t claim it, you won&#39t get it, so advisers of homosexual clients should recommend that a nomination (or expression of wish) in favour of a same-sex partner is sent to the scheme to help establish the validity of a future claim. Of course, this nomination may be changed at any time, much to the chagrin of scheme actuaries who cost funding levels on the assumption that a certain percentage of scheme members will die without a dependant.

Next, transsexuals, who (as discussed in my last article) are now able to marry and enjoy other benefits on the basis of their new sex.

Then we move on to married and unmarried heterosexuals. Married heterosexuals, burdened by the fact of being locked into an unhappy marriage (is there any other type of marriage?) are already paying the price for this new liberalism as many companies decide to simply scrap final-salary schemes altogether rather than tolerate the requirement to make subjective decisions about the merits of a surviving partner&#39s pension claim.

Perhaps, the conclusion of this line of reasoning is to advise clients not to get married (a fairly sensible recommendation, anyhow). However, opposite-sex common-law partners in many cases fare worse than same-sex partners. This is because our legislators take the view that if these people want to establish a legal relationship, they can, simply by getting married. Pension advice to these people, then, is simply to get legally married.

Finally, we move on to the elderly. I have briefly mentioned this before but the time is drawing near when employers will not be able to enforce retirement on an employee purely on the basis of old age. If employment can continue, then so can membership of the employer&#39s pension scheme, and the death-in-service scheme and the group PHI and private medical scheme and … get the picture?

The latest date this can come into force around Europe is 2006 but it looks like being 2005 at the latest in the UK. Before then, many employers and employees can achieve better positioning by being forewarned and forearmed by their advisers, as I will outline in my next article.


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