The Marriage (Same Sex Couples) Act 2013 (the Act) will make it lawful for same sex couples to marry in England and Wales. Many of the Act's provisions will come into force on 13 March 2014, several months earlier than originally planned.
Trustees and employers will need to decide ahead of this deadline whether to treat same sex marriages the same way as opposite sex marriages in the context of death benefits under occupational pension schemes, or alternatively, to provide the minimum benefits required by the new legislation.
Largely, the Act allows for the marriage of same sex couples and equalises legal rights as between same sex and opposite sex married couples. However, the Act will extend the exemption under the Equality Act 2010 to also apply to same sex married couples. Consequently, death benefits payable to a same sex married survivor can be limited solely to periods of pensionable service the member had completed on and from 5 December 2005 as well as any contracted-out benefits accrued on and from 6 April 1988 (the Statutory Minimum).
Contracted-out death benefits
The rules of contracted-out schemes will not automatically be overridden by the legislation to provide for contracted-out death benefits to a same sex married survivor. Consequently, the rules for these schemes will need to be amended to ensure they are compliant with the new legislation.
Non-contracted out death benefits
The legislation will override the scheme rules in respect of non-contracted out death benefits which are based on pensionable service to ensure the Statutory Minimum death benefits are payable to a same sex married survivor (whether the scheme rules provide for this or not). However, it will be up to the employers and trustees to decide whether the rules of the scheme should be amended to allow for additional benefits for same sex married couples (i.e. to level the position with opposite sex married couples).
Schemes with death benefits based on multiples of salary
The legislation will also override the scheme rules which provide for death benefits which are based only on salary multiples and are not linked to pensionable service (e.g. most DC schemes). These schemes will be automatically compliant with the new legislation.
Trustees and employers should note that regardless of whether they decide to equalise the position under the scheme rules for opposite sex and same sex married couples, it will be necessary to review their rules to ensure that references to terms such as "marriage", "spouse", "widow" etc. reflect the intended benefit design.
Trustees will be able to modify their scheme by resolution in relation to all or part of a surviving same sex spouse's subsisting rights, so that a surviving same sex spouse is treated in the same manner as a surviving opposite sex spouse. This will apply regardless of whether the scheme rules allow for amendment by a resolution of the trustees.
However, in any event we recommend that all schemes review the relevant provisions and, where necessary, make amendments in accordance with the scheme's power of amendment. This will ensure there is clarity on the death benefits to be provided in respect of same sex marriage survivors.
Whilst the Act comes into force on 13 March 2014, there remains a possibility that further changes could follow in response to potential discrimination issues. In the Employment Tribunal case of Walker v Innospec, it was held that limiting death benefits for civil partners was incompatible with EU law. The appeal to this case is likely to be published in Spring 2014, and whilst the result will not be binding on schemes, the outcome could be persuasive.
Further, the Secretary of State is required to conduct a review of the effect of eliminating differences in treatment because of sexual orientation. A report on the outcome of the review is to be published by 1 July 2014, with subsequent amendments to the Act a possibility.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at February 2014. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.
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