As this article goes to print, the first same sex marriages will be taking place across England and Wales. Having received Royal Assent in July 2013, the government announced just before Christmas that the Marriage (Same Sex Couples) Act 2013 (Act) would come into effect in the spring, with the first marriages taking place from 29 March 2014.
As with the introduction of the Civil Partnership Act 2004, the Act requires trustees of defined benefit schemes to consider the effect that this legislation will have on survivors’ benefits and whether any amendments to their scheme’s rules will be needed as a result. This note sets out the potential impact of these changes and the actions to be taken by trustees.
What does the Act require?
Section 11 of the Act states that, generally, marriage will have the same effect in relation to same sex couples as it has in relation to opposite sex couples.
This could mean that pension schemes would have to treat same sex couples in the same way as opposite sex couples for the purposes of survivor benefits.
Is there an exemption?
Yes: benefits can be provided on the ‘statutory minimum’ basis, as currently applies to civil partnerships.
What is the statutory minimum?
The Equality Act 2010 (EqAct) extends the current exemption from the overriding non-discrimination rule that currently applies in respect of civil partnerships so that survivors’ benefits can be paid to same sex spouses on the same basis.
The Act also amends the Pension Schemes Act 1993 (1993 Act) in order to extend the contracting-out requirements for service on and after 6 April 1988 to the widows and widowers of same sex married couples.
This means that occupational pension schemes:
• will have to provide benefits to same sex spouses in relation to contracted-out rights based on service on and after 6 April 1988; and
• are permitted to restrict other survivor benefits payable to service on and after 5 December 2005 (being the date that the Civil Partnerships Act 2004 came into force).
However, a report considering the differences between same sex survivor benefits and opposite sex survivor benefits is due for publication by 1 July 2014 and is currently subject to a private consultation. Trustees should note that if the Secretary of State concludes that changes should be made for the purpose of eliminating or reducing differences, the exemption under the EqAct may be removed in the future.
Can benefits be provided on a more generous basis?
While the natural starting point for trustees considering what benefits to apply in respect of same sex married couples is the benefits already provided in respect of civil partners, it is open to trustees to provide more generous benefits than the statutory minimum. Such a decision should first be discussed with the scheme’s employer, since it also relates to the scope of benefits provided to employees and former employees, and also with the scheme actuary so that any funding implications are considered and agreed before any changes are implemented.
What happens if no action is taken?
Whilst the intention behind the legislation is clearly to enable pension schemes to provide survivor benefits to same sex married couples on the statutory minimum basis, there is a slight issue in the way that the Act interacts with the EqAct, meaning that it is not wholly clear that this is the default position for schemes in the event that no action is taken.
For this reason, trustees may find it preferable to amend their scheme rules to expressly provide for same sex married couples sooner rather than later after the Act comes into effect. This will provide greater certainty as to the benefits being provided under their scheme and may also help reduce the risk of complaints from members. Trustees intending to rely on the provisions of the Act in order to provide benefits to same sex married couples without making any immediate amendments to their scheme rules should seek legal advice before the Act comes into effect.
When do the changes need to be made?
In order to provide certainty for members and themselves in administering benefits, trustees should ensure that any amendments are made, ideally, by 29 March 2014, or as close to this date as possible. Members will also need to be notified of the changes to their scheme once the amendments are in place.
Matthew Swynnerton is partner in the employment group, DLA Piper