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
It is increasingly common for scheme rules to
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
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.
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
- 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
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
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
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.