On 5th December 2005, the Civil Partnership Act 2004 came into force. The Act enables same-sex couples to form a legal relationship, known as a civil partnership. If you enter into a civil partnership, you will be given similar rights to married couples in relation to a number of issues.
These include pension rights.
This Factsheet looks at the major issues about same-sex relationships in respect of pension benefits that YOU should be thinking about when it comes to retirement planning.
Some of the points are more obvious than others, but they are all important.
"The Government is committed to equality for all and in our modern society it is only right that gay and lesbian couples who have made a decision to share their lives should be given the recognition they deserve.”
Lord Philip Hunt, DWP Minister, 5th October 2005
What is a Civil Partnership?
A civil partnership is a formal legal status allowing same-sex couples to benefit from the same entitlements and responsibilities that exist for married couples.
To be eligible to enter into a civil partnership you must:
- be over 16 years of age,
- not be related to your partner,
- not already be in another civil partnership,
- not already be married.
Same-sex couples over 18 in England, Wales and Northern Ireland can register for a civil partnership. Couples aged 16 to 17 must have written consent of a parent or a legal guardian, except in Scotland where there is no need for parental consent.
Similar to marriage, there are official procedures required to register a civil partnership.
How can I register a civil partnership?
You can register a civil partnership through the registration service. The formalities of the act resemble those for a civil marriage. You have to sign a civil partnership document in the presence of each other, a civil partnership registrar and at least two witnesses.
What effect will my civil partnership have on my pension benefits?
If your pension scheme offers benefits to married partners for preserved members, it must also offer them to civil partners.
From 5th December 2005, civil partners have the right to survivors’ benefits, in the same way as widows and widowers have in a marriage.
What benefits would be payable on my death?
Depending on the Scheme Rules, if you are in a civil partnership, on your death your partner could be entitled to:
- a lump sum
- an income
- a lump sum and an income
Your pension scheme must legally provide survivors’ benefits to your partner:
- from any contracted-out service (see below) built up since 6th April 1988 and
- from any pensionable service built up since 5th December 2005 in line with any spouse’s benefits already provided for in the scheme rules.
If your pension scheme was contracted-out, civil partners (like married couples) are entitled to survivor’s benefits in relation to pension rights built up since 6th April 1988 (the date when contracted-out schemes had to provide widowers’ benefits).
What is contracted-out service?
Since 1978, as well as the Basic State Pension (often called the ‘Old Age’ Pension) you may have been eligible to build up additional State pension benefits which would be paid at State Pension Age.
Between 6th April 1978 and 5th April 2002, this additional State pension was known as SERPS - the State Earning Related Pension Scheme. SERPS was replaced by the State Second Pension (S2P) which came into effect on 6th April 2002.
If your pension scheme was ‘contracted-out’ you exchanged your additional State pension (but not your Basic State Pension) in return for your scheme promising to pay you a minimum pension instead. Both you and your employer paid reduced National Insurance contributions for the period you were ‘contracted-out’ of the State scheme.
Your Basic State Pension is unaffected by you having been ‘contracted-out’.
The benefits payable on your death as a preserved member is often very different to the benefits payable to active members or pensioner members. You may have pension benefits payable on your death, the value of which might surprise you one way or the other.
You should note also that there are a few pension schemes that provide a survivor’s pension greater than the basic legal requirement, but it only applies to the spouse / civil partner that the member was married to at the date of ceasing to be an active member. i.e. the date when he/she became a preserved member (this is important and is explained in our Factsheet My Marital Status).
What if my surviving partner enters a new civil partnership?
If a widow or widower marries again, or lives with someone else as husband or wife, they may lose the right to survivors’ benefits - it depends on the Scheme Rules.
Likewise, if a surviving partner enters a new civil partnership, or lives with someone else as if they’re in a civil partnership, they too may lose their survivors’ benefits depending on the Rules of the Scheme.
Can my pension scheme backdate survivors’ benefits to before 5th December 2005?
Your pension scheme may backdate survivors’ benefits to before 5th December 2005, although there is no legal requirement for it to do so.
So, legally - apart from any contracted-out pension you have - the scheme only has to provide survivor’s benefits for any pension accrued after 5th December 2005.
If you became a preserved member of your scheme before that date, you will not have accrued any pension after 5th December 2005 and therefore no survivor’s benefits will apply, other than from any contracted-out service you have. However, the scheme may choose to amend their rules to provide survivor’s benefits in respect of the whole of your pension accrued before 5th December 2005.
Jim had been a member of the ABC Pension Scheme from June 1990 until he left employment with ABC Engines Ltd to start a new job elsewhere in August 2003. On leaving, he became a preserved member of the ABC Pension Scheme.
The scheme is ‘contracted-out’, and it provides a spouse’s pension equal to 50% of the member’s pension on death before and during retirement.
Jim and his partner, Steve, entered into a civil partnership in January 2006. On Jim’s death, Steve is legally entitled to:
- a survivor’s pension in respect of Jim’s ‘contracted-out’ benefits from 6th April 1988
- a survivor’s pension in respect of 50% of Jim’s benefits in respect of any service after 5th December 2005 (of which there is none)
Unfortunately, Jim died in August 2006, at which point the ABC Pension Scheme calculated his pension to be £9,750 p.a., which included £6,100 p.a. in respect of his total contracted-out service.
The ABC Pension Scheme will pay Steve a survivor’s pension of half of Jim’s contracted-out pension i.e. £3,050 p.a. (50% of £6,100 p.a.).
Because Jim left before December 2005, the ABC pension scheme will not legally have to pay any survivor’s benefits on the remaining part of Jim’s pension.
If the ABC Pension Scheme had changed their rules to allow survivor’s benefits to be backdated so that all of Jim’s pensionable service counted towards survivor’s benefits, then Steve would have received a survivor’s pension of £4,875 p.a. (50% of Jim’s entire pension).
So, if you have entered into a civil partnership you should establish what benefits would be payable to your partner on your death and you should monitor this from time to time to check on any changes made to the Scheme Rules.
Contracted-In Pension Scheme – minimum legal entitlement
before 5th December 2005
since 5th December 2005
No legal entitlement to any
If the scheme provides a widow/widower benefit it must provide the same for civil partners in respect of the whole of the pension earned after this date
Optional: If the scheme does provide a widow/widower benefit, it could choose to backdate civil partners pensions to when members joined the pension scheme
(or any other date it chooses)
Contracted-Out Pension Scheme – minimum legal entitlement
before 5th December 2005
since 5th December 2005
50% of any contracted-out pension earned since 6th April 1988
No legal entitlement to any
on any other part of the pension
If the scheme does provide more than the minimum widow/widower benefits, it must provide the same civil partners pension in respect of the whole of the pension earned after this date
Optional: If the scheme does provide more than the minimum widow/widower benefits, it could choose to backdate civil partners pensions to when members joined the pension scheme
(or any other date it chooses)
Some pension schemes, including some of the public sector schemes such as the NHS, have already backdated survivors’ benefits to April 1988. However, don’t assume yours has backdated survivors’ pensions – write and find out what your pension scheme will pay on your death.
Should I tell my pension scheme if I have entered into a civil partnership?
You should consider telling your pension scheme or the scheme administrators that you have entered into a civil partnership. It is possible that they will require proof for their records.
If you have previously completed a Nomination Form or Expression of Wish Form (or some similarly entitled document) which details what you would like to happen to any benefits in the event of your death, this may need to be revisited if your marital status has changed.
If you have not completed a Nomination Form, get in touch with your pension scheme, as this type of document helps the Trustees to know what your wishes are.
Keeping your scheme appraised of changes could save considerable heartache or even prevent unnecessary financial difficulty for the person or people you wish to protect.
What if my civil partnership is dissolved?
When a civil partnership ends, the same rules apply as for divorcing couples.
For example, civil partners may be required to share pension rights as part of their settlement, or give a specified sum from their pension fund to the ex-partner.
If a civil partnership is dissolved (the equivalent of divorce) pensions may be subject to a ‘sharing order’.
Is there any effect on my State Pensions?
If you or your partner dies, whoever survives has the same rights to the other’s State Pension as a widow or widower has in a marriage.
If you are under State Pension age on your partner’s death, you will be able to claim bereavement benefit. Similarly, your partner will have the same option if you die first.
From 2010, as a civil partner YOU will be able to get a Basic State Pension based on your partner’s National Insurance Contributions (NICs) if it’s better than a pension based on your own NICs (and visa versa).
Up until then, all civil partners will be treated as husbands (at present, a man cannot take a pension based on his wife’s NICs, but the law is changing in 2010 to give husbands equal rights).
What implications are there for my pension scheme?
As we have already established, from 5th December 2005, benefits for married couples also apply to civil partners. Scheme rules do not need to be rewritten because the new legislation is ‘overriding’ (it automatically replaces previous legislation).
However, some legal experts advise that the rules would be clearer with appropriate amendments being made to scheme booklets (like including ‘surviving civil partner’ where ‘widow’ or ‘widower’ is mentioned).
Employers may decide to recognise all employee service to determine benefits for civil partners. As this is not overriding legislation, scheme rules must be amended to reflect the changes although there may be ‘Section 67’ implications.
What is Section 67?
Section 67 of the Pensions Act 1995 is legislation that says the benefits of existing scheme members may not be adversely affected by an amendment.
So, a scheme must take care that where it grants extra benefits for one class of member, it does not diminish the security of others. If this is a significant risk, the Trustees should request specific funding to cover the extra benefits.
What if I change gender?
In the case of State and contracted-out pensions, there are rules setting out the rights of a person who changes gender.
The main consideration is whether the new gender is officially recognised. If so, a certificate will have been issued, and YOU will be entitled to pension rights accordingly.
In the case of occupational pensions, it is up to the scheme to decide how a person’s rights are affected.
Your pension scheme may acknowledge your new gender at the point of reassignment, or from the date you became a member of the pension scheme.
Are there other legal changes I should know about?
The ‘disclosure requirements’ have been amended to cover civil partners as well as husbands or wives.
These requirements give your civil partner the rights to certain information about your occupational pension (and visa versa).
Your civil partner will also be entitled to make a complaint to the Pensions Ombudsman.
Summary & Key Points
A civil partnership allows same- sex couples to obtain legal recognition for their relationship.
When making enquiries about your preserved benefit it is very important that you make it clear that you are a preserved member rather than an active member or pensioner member. Active, preserved and pensioner are different classes of membership of a pension scheme and any definitions and paragraphs contained within your Scheme Rules or scheme literature relating to any benefit may differ considerably between these categories.
On average, people change jobs every 5 to 6 years. It is possible therefore, that you will have more than one pension benefit. For each pension benefit you need to consider the following items:
- Why your marital status is important in terms of your pension benefit.
- If you have a partner, whether he/she will receive benefits from your pension scheme on your death before or during retirement?
- If your have pension scheme service before 5th December 2005 has your pension scheme backdated survivors benefits?
- Have you kept your pension scheme informed of any changes to your marital status?
- Have you completed and returned to your pension scheme a Nomination Form (or similar document) in respect of death benefits?
- If your partner is much older or younger than you, have you investigated what effect this would have on any death benefits?
- Keep informed. Your scheme may modify benefits and Rules. Legislation may change. Your circumstances may alter.
- Rules differ from scheme to scheme and are wide and varied in content. Don’t assume that what applies to one of your pension schemes will necessarily apply to others that you may have.
- HMRC impose rules that registered pension schemes must conform to.
People seldom have identical pensions and you should avoid drawing comparisons with colleagues whose circumstances may at first appear the same but could emerge as having significant differences.
This is not an authoritative document. Seek professional advice from an appropriately experienced and qualified adviser.
Useful Links to Websites or Documents with related articles
Read advice to employers about Civil Partnerships on the ACAS website
Civil Partnerships v2.9 Preserved
Last updated 14/07/2009