Introduction
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 main issues about same-sex relationships in respect of pension benefits that YOU should be thinking about when it comes to retirement planning where your provision predominantly use money purchase arrangements.
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 which 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 arrangement offers benefits to married partners, 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 rules of the arrangement, 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 must legally provide survivors’ benefits to your partner if your pension arrangements were used to contract you out of the State Earnings Related Pension Scheme or its successor S2P. Civil partners (like married couples) are entitled to survivor’s benefits in relation to that part of your benefit.
What is contracted-out service?
If your pension scheme was ‘contracted-out’ you exchanged some or all of your additional State pension (but not your Basic State Pension) in return for your scheme investing a certain minimum amount on your behalf. The emerging pension that you will receive from that minimum contribution when you retire will depend upon investment returns. Both you and your employer could have paid reduced National Insurance contributions whilst you were ‘contracted-out’ of these State Pension schemes.
Your Basic State Pension is unaffected by you having been ‘contracted-out’.
What if my surviving partner enters a new civil partnership after my death?
It is highly unlikely that once any benefits come into payment that they will be affected.
Should I tell my pension scheme if I have entered into a civil partnership?
You should consider telling your 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 administrators to know what your wishes are.
Comment:
Keeping your administrators 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 vice 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. The rules governing schemes do not need to be rewritten because the new legislation is ‘overriding’ (it automatically replaces previous legislation).
Are there other legal changes I should know about?
The legal requirements give civil partners the right to certain information about their partner’s pension arrangements.
Civil partners can 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.
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.
- 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?
- Keep informed. Your scheme may modify benefits and Rules. Legislation may change. Your circumstances may alter.
- Money purchase schemes have many forms and can be quite different from one another. Don’t assume that what applies to your money purchase scheme will necessarily apply to other pension arrangements that you may have.
- HMRC impose rules, which 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 a guide for employers about gender reassignment from the Government’s Women and Equality Unit
Read advice to employers about Civil Partnerships on the ACAS website
Civil Partnerships v1.3 Preserved MP
Last updated 14/07/2009
