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All change for love and pensions except in some quarters

This article is part of
Guide to advising on pensions and equality

All change for love and pensions except in some quarters

There have been so many changes to pensions legislation and pensions taxation in recent years, with more anticipated in the forthcoming March 2016 Budget.

However, as fast as one supposedly ‘broken’ aspect of pensions is fixed - such as the removal of the compulsion to buy an annuity - another problem emerges; such as the ongoing furore over women born in the 1950s who will be detrimentally affected by changes to the state retirement age.

The state pension in itself is a fraught area for civil partnerships.

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As early as 2003, the government realised it could take “many years” for changes in pension systems to reach maturity.

In a June 2003 consultation document from the Women and Equality Unit (WEU), it said: “It would not be possible before 2010 to introduce state pension rights for registered partners, which treat all-male and all-female couples equally.

“Introducing changes before this time would create new inequalities in the state pension system.”

Thankfully, this situation no longer applies, as the government is moving away from widows/widowers pensions from April this year, treating all people as single and earning pensions within their own right, which overcomes the issue raised by the WEU.

According to Robin Ellison, consultant for Pinsent Masons, “The state pension has moved away from using ‘dependency’ (i.e. a spouse) as a reason for giving a benefit, towards each partner earning in their own rights.”

However, this is only part of the solution to ensuring that nobody is left in financial hardship in retirement, simply because of their marital status or sexual orientation.

Mr Ellison, explains that before the 2004 Civil Partnership Act, it was not possible in the UK for same-sex couples to marry or enter into a legal relationship or status equivalent to marriage.

He says: “As a consequence, there were material issues in practice for pension schemes and scheme members, including the fact many benefits payable under pension schemes were limited to a married, opposite-sex partner.

“This applied to state benefits and to requirements for contracted-out benefits in occupational schemes. Benefits payable to same-sex partners were only paid at the discretion of the trustees (as with non-married heterosexual partners).

“As only married spouses pre-2004 were able to divorce, pension sharing was only available on termination of a marriage, not on the termination of any form of relationship.

“Also, HM Revenue & Customs required the recipient of pension benefits payable, following the death of a member, to be limited to a spouse or a dependant.”

Therefore, before the 2004 Civil Partnership Act, same-sex partners were in the same position as unmarried heterosexual partners living together.

When the law finally afforded same-sex partners equal rights to financial and legal protection, from 5 December 2005 onwards (couples could register from 21 December 2005), this did not mean that all companies had to change their pension schemes.