After a Supreme Court ruling that Denise Brewster should receive her deceased partner's pension despite being unmarried, Michael Klimes explores its significance for other schemes
Last month's ruling by the Supreme Court that Denise Brewster should receive the pension of her deceased partner, William Leonard McMullan, could have much wider implications for pensions.
While the case relates to the awarding of death benefits in a public sector scheme, it is a significant ruling and trustees of private sector schemes should take note of it. In the worst case scenario, it could lead to schemes potentially having to pay out more in death benefits to members who are unmarried and whose partner has died.
A number of people in the industry believe trustees should take note for the following reasons.
Firstly, the Brewster ruling fits into a liberal interpretation of the law where the courts expand rather than narrow the definition of discrimination. These rulings increase the potential number of members who can make claims against their schemes on discrimination grounds.
Secondly, there have been a number of cases where equality in pensions has been a central issue, such as the recent one involving young judges that the government lost.
Thirdly, working out how scheme rules and data policies should apply to surviving members known as cohabitees, in more unconventional relationships, is tricky.
Scope of ruling
What is the scope of the ruling for private sector DB schemes?
Pitmans director of pensions Symon Rowley says: "There is no immediate impact for trustees of private sector DB schemes. A similar claim made directly against a private sector scheme is unlikely because as the law stands it is not unlawful for such schemes to treat unmarried partners differently from spouses or civil partners. This is because marital status is not a protected characteristic under the Equality Act 2010."
Rowley points out that many DB members are unaware of how schemes are set up. Benefits payable in the event of the member's death depend on the benefit structure and governing rules, which may not include cohabitees. "The term 'common law spouse' is widely used by members but it has no legal meaning and simply means a cohabitee," he adds. "Members can be surprised to learn that where a pension scheme only pays a survivor's pension to a spouse, this means their unmarried partner would receive nothing on death."
Clearly, the law limits the ability of members who are cohabitees to make claims. But the demographics of schemes can also minimise the impact of the Brewster ruling on private sector trustees, according to PTL managing director Richard Butcher.
"If you look at the age of members in DB plans, you are likely to find a lot of them on average are likely to be older. This is because many DB schemes closed to new members years ago. Furthermore, members in those plans, since they are older, are more likely to be married as they have lived longer [they have simply had more time and opportunity to get married]. Also, in some cases, they probably got married as they believe in more traditional values."
If a scheme has a minority of members that are young cohabitees, it less likely the scheme will fall foul of something like the Brewster ruling.
Spirit of the age
However, there are issues to consider outside the letter of pensions law. Trafalgar House director Daniel Taylor thinks scheme rules should reflect how times have changed. "When you account for the massive boom in the number of cohabiting unmarried couples, the case for change becomes overwhelming; meaning that this is really a matter of when, not if, the outcomes of this ruling will need to be applied to private sector schemes."
He sees the ruling as a warning shot from the Supreme Court for trustees in two areas. "Both about the decisions [the trustees] will have made about the settlement of death benefits, but also about how they manage their records. Most schemes don't record the status of non-legally recognised relationships and they don't consistently seek to gather this information in the same ways as they do for married couples," he adds.
Association of Member Nominated Trustees (AMNT) co-chairman David Weeks (pictured above) thinks trustees need to consider these issues. "If I was a trustee on a scheme in this context, the questions I would be asking are: 'Do our scheme records keep the sort of information we need about members that are cohabitees?' Also, 'Do our scheme rules conflict with the ruling of the court?' Trustees will want to accord with the law and take such measures as they're required to do so."
Whatever the courts say, there is an argument that society has changed and maybe the way death benefits are awarded in pensions should reflect this.
The Pensions Regulator (TPR) has substantially increased the usage of its powers against trustees – posting a sharp rise in the use of formal information gathering powers and High Court production orders during the three months to the end of September....
The Pension Schemes Bill has completed its third reading, crossing its latest hurdle in the House of Commons.
An amendment to the Pensions Schemes Bill which would have seen people given a pre-booked Pension Wise appointment ahead of accessing their retirement savings has been defeated.
A proposal to ensure savers receive a Pension Wise appointment prior to accessing their retirement pot has received cross-party support in parliament, while Labour seeks net-zero pensions by 2050.
Pension scams are not just about the money lost, but the lives devastated, says Nicola Parish, so the industry must unite to defeat this scourge.