Zenith Family Current Awareness

​Walker v Innospec Ltd: pensions, civil partnership and inequality

17 July 2017

Marisa Allman

Mr Walker was triumphant in the Supreme Court last week, finally winning the right for his husband to benefit fully from his pension in the event of his death. He has been in a relationship with his husband since 1993, entered into a civil partnership with him as soon as it was possible in 2005, and is now married to him. Had he married a woman at any time after commencing employment with Innospec Ltd in 1980 she would have been entitled to the full pension provided by the scheme in the event of Mr Walker’s death, so why was there any issue about his male spouse receiving the same entitlement?

The problem lies with the Equality Act 2010. Sexual orientation is a protected characteristic under the Equality Act, which makes it unlawful to discriminate against a person whether directly or indirectly on grounds of their sexual orientation. However, certain exceptions to the general rule were incorporated into the Equality Act, and in particular in relation to occupational pensions in Schedule 9, paragraph 18 reads;

Benefits dependent on marital status, etc.

18(1)A person does not contravene this Part of this Act, so far as relating to sexual orientation, by doing anything which prevents or restricts a person who is not within sub-paragraph (1A) from having access to a benefit, facility or service—

(a)the right to which accrued before 5 December 2005 (the day on which section 1 of the Civil Partnership Act 2004 came into force), or

(b)which is payable in respect of periods of service before that date.

(1A)A person is within this sub-paragraph if the person is—

(a)a man who is married to a woman, or

(b)a woman who is married to a man, or

(c)married to a person of the same sex in a relevant gender change case.

The effect of this section was to give employers the ability to only take into account rights accrued since the Civil Partnership Act came into force in 2005 when providing survivor benefits for a civil partner or spouse of the same sex. In the Walker case, Mr Walker had already taken early retirement in 2003, before the Civil Partnership Act came into force, and so all of his pension benefits had accrued prior to December 2005. When Mr Walker asked Innospec whether they would pay a full spouse’s pension of about £45,700 per annum to his spouse in the event of his death, they refused. Instead Mr Walker’s spouse would get only the GMP of about £1,000 per annum. It was this refusal which prompted the present proceedings, which began in the employment tribunal and continued in the EAT and the Court of Appeal before final reaching the Supreme Court.

Given the significance of the issues the Secretary of State for Work and Pensions eventually intervened in the proceedings. Their stance is perhaps particularly revealing about the attitude of this governmental legal department to same sex relationships; they argued in the Court of Appeal that paragraph 18 creates a ‘difference in status’ between civil partners and married persons and they are not in a ‘comparable position’ in respect of pension rights. The Court of Appeal rejected this argument without hesitation and confirmed that civil partnership and marriage are comparable situations, but it is surprising that the argument was run at all. Nevertheless, Mr Walker did not succeed in the Court of Appeal.

The key issue in the appeals to the Court of Appeal and the Supreme Court was whether Paragraph 18 was incompatible with the European ‘Framework Directive’ which prohibits unequal treatment on grounds of sexual orientation, and if so which should take precedence.

One of the difficulties with deciding whether Paragraph 18 is incompatible with the Framework Directive is the issue of the applicability of the Framework Directive to pre-existing circumstances. The UK was required to implement the Framework Directive by 2 December 2003.

The Supreme Court in reaching their decision highlighted an important distinction between the ‘no retroactivity principle’ and the ‘future effects principle’. The principle of no retroactivity means that a new rule does not apply to situations which were permanently fixed before the new rule came into force. The future effects principle provides for the application of a new rule from the date of its entry into force, but including application circumstances commencing before that date. For example, an employer’s actions pre-dating the date of entry into force of the new rule would not be unlawful, but an employer’s continuing actions under a contract, commencement if which pre-dated the entry into force of the new rule would.

A number of exceptions to these principles had been made by the CJEU in circumstances where there would otherwise have been catastrophic economic consequences for the member states concerned. The Supreme Court held that there were no such consequences for employers in the UK of applying the future effects principle to occupational pensions to same sex spouses because the employers could realistically expect that any of their employees could enter into an opposite sex marriage at any time and would have to plan for that contingency in determining the amount of widow’s benefits receivable under the plan; “the financing of Innospec’s retirement scheme should have been planned taking into account a possible change in Mr Walker’s marital status. He could not have been denied entitlement to a spouse’s pension if, perfectly legally, he married a woman after he retired”.

In consequence, therefore, the Supreme Court concluded that Paragraph 18 of Schedule 9 to the Equality Act 2010 is incompatible with the Framework Directive and should be disapplied, Mr Walker’s husband will get his widow’s pension should Mr Walker pre-decease him.

It seems particularly unfortunate that it should have come to this in a country which has made enormous leaps ahead in its recognition of same sex families in recent years. It is clear from the judgment that each tier of court before the Supreme Court had been sympathetic to Mr Walker and his spouse, but had felt constrained by Paragraph 18 to allow Innospec Ltd to opt out of offering comparable pension rights to a same sex spouse, whereas in both the Court of Appeal and the Supreme Court the Secretary of State had defended the discrimination permitted by Paragraph 18. In the end Mr Walker and his spouse were only protected from government sanctioned discrimination by European Law and the proper application of it by the Supreme Court.

Marisa Allman

17th July 2017

Current Awareness

By the Family team