Can Pension Benefits Arising from Changes in the Law be Applied Retrospectively?
The Court of Appeal (CA) has applied the principles of 'no retroactivity' and 'future effects' by rejecting two appeals from individuals seeking to gain pension benefits based on changes to the law brought in following the end of their employment.
Background
The principle of 'no retroactivity' means EU legislation does not, in general, have retrospective effect. The principle of 'future effects' means that amending legislation can be applied to the future effects of a situation which arose under the previous law. If the situation was permanently fixed before the introduction of the new law, there are no future effects to which it can apply. These two principles were examined in this case.
Mr O'Brien (OB) worked as a Recorder (a part time fee-paid judge) from 1978 until 2005. On 7 April 2000, the UK was required to incorporate the Part Time Workers Directive into national law, which entitled OB to a pension. OB argued that his pension entitlement should be backdated to begin from 1978. The Employment Appeal Tribunal (EAT) found against OB and he appealed the decision.
Mr Walker (W) was a member of a private pension scheme with his employer, Innospec, from January 1980 until he retired in March 2003. Under the terms of the pension scheme, he was entitled to the benefit of pension for life to a surviving spouse. W lived with a male partner from September 1993. The Civil Partnership Act 2004, which came into force in December 2005, allowed same sex partners to be treated as a spouse. W and his partner became civil partners in January 2006. W argued that Innospec and the pension scheme trustees had discriminated against him on the basis of his sexual orientation. Again the EAT found against W and he appealed the decision.
The Court of Appeal found against both OB and W.
In OB's case, it was held that he had not acquired pension rights for his service before 7 April 2000, when the law changed, and could not do so retroactively. This meant that the legal situation that had arisen had exhausted its effect. The pension rights arising between 1978 and 7 April 2000 were to be determined by the law as it stood during that period of time - otherwise the legislation would have retroactive effect.
In W's case, the Court of Appeal said that, during W's period of service, and when he retired, the treatment complained about was lawful, therefore W's same sex partner would not gain his pension as a surviving spouse. Under EU law, the right to a pension payment is regarded as accruing at the time of the service to which it is referable - even though the payment will not be made until retirement.
Best Practice
The decision is important for employers and pension scheme trustees, when faced with queries from employees and members regarding pension entitlement arising as a result of changes in law. The impact on W was significant - if he had been married to a woman, an additional £41,000 of pension benefit would have been available. This case reinforces the principle that the right to a pension arises and becomes fixed during the currency of the service to which it is referable.
The government reviewed survivor benefits in pension schemes and published a report in June 2014. However, no firm conclusions or changes of the law have arisen as a result. It is likely they were waiting for the decision of this case and we wait to see if there is further legislation on this in the future.