Pensions for partners: The issues involved in providing pension benefits for unmarried partners

United Kingdom
Kevin Pither examines some of the issues involved in providing pension benefits for unmarried partners

With an ever increasing divorce rate, campaigns by the Equal Opportunities Commission and the TUC and the prominence of the Lisa Grant case, considerable media attention has been given to benefits for partners. Trustees may not be fully aware of the flexibility that is or could be contained in their scheme rules in relation to the payment of benefits to individuals other than the lawful spouse.

Inland Revenue

It is increasingly common for scheme rules to contain
a provision enabling survivors' benefits, in certain circumstances and at the trustees' discretion, to be payable to a dependant rather than to a lawful spouse. However, the trustees' ability to use such a rule may be restricted if the term "dependant" is too narrowly defined.

In May 1996 the Pension Schemes Office explained its practice relating to the beneficiary class of "dependant". Benefits may be provided for unmarried partners, whether of the same or the opposite sex, provided that there was an element of financial dependency or interdependency (see the McKenna & Co August 1996 Pension Law Bulletin). In order to adopt this wider approach trustees may wish to consider including the new definition of dependant when their scheme rules are next updated.

Contracting out

Scheme rules may be framed so that trustees can only pay a dependant's pension if there is no spouse. Alternatively, the trustees may have a discretion to pay a pension to another dependant even where there is a lawful spouse but the couple are no longer living together. However, the trustees' discretion may be restricted if the scheme is contracted-out.

In order to satisfy the requirements of the reference scheme test, widows and widowers of members must be entitled to a pension, whether the member dies before or after reaching the age of 65. The only circumstances in which the surviving spouse's pension required under Section 12B of the Pension Schemes Act 1993 may not be payable are where:

  • the member marries after having received benefits under the scheme

  • the widow or widower remarries or lives together as husband and wife with another person to whom he or she is not married after having received benefits under the scheme

  • the widow or widower is living together as husband and wife with another person to whom he or she is not married at the time of the member's death.

Similar provisions apply to the payment of a spouse's pension in relation to the guaranteed minimum pension and protected rights, except that the pension may cease if the widow or widower remarries before reaching State pensionable age.


If trustees are to pay pensions to dependants other than the spouse, a number of considerations must be borne in mind, both in the framing of the rules and in the exercise by the trustees of their widened discretion.

It may be that payments are only permitted if the member has actually made a nomination. If so, trustees should ensure that members have a regular opportunity to revise their nomination or expression of wish forms. A concise note should be circulated explaining the full range of potential beneficiaries and that these forms are important for the payment of pensions as well as lump sum benefits on death in service. Even if the trustees are not limited to the people nominated, it will clearly assist the trustees if there is a nomination.

It may be helpful expressly to limit payment to people who were living together as an established couple at the time of the member's death, with perhaps some rule of thumb as to what length of co-habitation constitutes an established couple. If so, care should be taken to establish a level playing field with married couples. For example, many older schemes provide that a spouse's pension will not to be paid if the member married after retirement and the marriage was of less than six months' duration (often referred to as a "death bed marriage" clause). However, the member may have lived with a common law partner for a considerable number of years but only married that partner a few months before death. A solution to this problem is to make the six month rule discretionary, so that trustees may award a pension in appropriate cases.

Same sex partners

Can rules limit the survivor's pension to partners of the opposite sex? The case of Grant v South-West Trains Limited highlighted the provision of benefits for same sex partners and concern was expressed as to whether it had implications for pension schemes.

The case concerned the right to travel concessions. Ms Grant's request for concessions for her female partner had been refused on the grounds that these concessions were only available for a spouse or for a partner of the opposite sex. The European Court of Justice was asked to decide whether this practice amounted to sex discrimination prohibited under Article 119 of the EC Treaty.

Contrary to the opinion of the Advocate General (see the Cameron McKenna January 1998 Pension Law Bulletin) the European Court held that South-West Trains' practice was not contrary to Article 119 and that Community law does not cover discrimination based on sexual orientation. The court dismissed the argument linking the case with PvS and Cornwall County Council, which concerned gender reassignment.

The Court did acknowledge that Community law could change - the Treaty of Amsterdam has inserted a new article (Article 6a) into the EC Treaty which could lead to the elimination of various forms of discrimination, including discrimination based on sexual orientation. However, that will not happen automatically. It requires further action from the Council of Ministers on a proposal from the European Commission following consultation with the European Parliament, so implementation of such a law may still be some way away.