The risks of not nominating a loved one for your pension benefits has again been demonstrated as the Pensions Ombudsman backed the Anglian Water trustees in denying a dependant’s pension to the cohabiting partner of a deceased scheme member. 

 

Many private sector defined benefit schemes give trustees discretion over who to grant benefits to after the death of a scheme member; they do not necessarily need to be nominated or can even be different to the person nominated if the trustees consider that this would be a more appropriate course of action, for example where the nominee is an ex partner. 

 

The question of whether unmarried beneficiaries must be nominated by the scheme member was addressed in a case brought by Denise Brewster, whose partner had been a member of the Northern Ireland Local Government Officers’ Superannuation Committee - which required unmarried dependants to be nominated - but had omitted to nominate her. In 2017, the Supreme Court ruled that the nomination requirement must be dropped and Ms Brewster must be given a pension. 

 

Ms R referred to the Brewster judgment in her complaint that Anglian Water and the trustees of the Anglian Water Group Pension Scheme were refusing to pay her a spouse’s pension on the grounds that she had not been nominated by her partner. 

However, pensions ombudsman Anthony Arter sided with the trustees on the matter, saying the Brewster judgment did not have any effect on private sector schemes. The trustees had been advised that the Human Rights Act 1998 did not apply the provisions of the European Convention of Human Rights directly to private pension schemes in the way it did for statutory public sector schemes. 

 

 

Ms R had also alleged that the company and trustees were discriminating against her as an unmarried partner, because while her partner did not fill in the nomination form, the company had evidence that her partner had recorded her as his ‘spouse’ on his company file.  

 

The trustees’ response was to go by the letter of the law, arguing that discrimination is only be unlawful in respect of protected characteristics – and while marriage and civil partnership are protected, being an unmarried partner is not, a view shared by Arter. 

 

Anglian Water, the sponsoring employer, had the power under the scheme rules to grant Ms R a pension despite not being nominated, if the company made a payment to the scheme. Anglian was asked by the trustees to permit a pension payment to Ms R but refused, meaning the trustees had no power to grant it to her. 

 

“AWS did not make a direction to the Trustees under Rule 13.1 and there is no evidence that the Trustees could make a payment under the Scheme Rules without a direction from AWS. In these circumstances, I find that there is no evidence of maladministration in the Trustees’ decision that it could not pay Ms R a pension,” Arter concluded, adding: “Although I sympathise with Ms R’s circumstances, it is my decision that neither the Brewster Judgment nor the provisions of the Equality Act assist Ms R with her complaint against the Trustees and AWS.” 

 

 

The case highlights the importance for pension scheme members of checking whether any nominations need to be made to ensure that their loved ones will be provided for under a pension scheme’s death benefit arrangements, said Mark Grant, head of pensions at law firm CMS. 

 

“It also is a reminder of the potential financial benefit of being married or in a civil partnership,” he remarked. 

  

Although not all private sector pension schemes require a written nomination to make an unmarried partner eligible for a dependant’s pension, some do, he noted and therefore “it is always worth checking what the formalities are”. Some schemes even require a partner to be married to or be the registered civil partner of the member to be eligible for certain death benefits.

 

"All of those factors should be considered by members, especially when death benefits under a pension scheme can be worth more than all of the person’s other assets put together,” said Grant. 

 

There can be even more intricate details to be observed, such as the order in which to go through formalities after a loved one’s death. Sarah Marshall, a trustee consultant at Pi Pension Trustees, writes that her neighbour had to prove he was financially dependent, but the council had already changed the name for the property – and the council’s system now showed only his name on what were supposed to be historic records, not his partner’s name. 

Marshall said it was important for scheme members to be made aware of the quirks of their scheme. "We tend to send out nomination forms on a three-year basis. You could do it with an annual newsletter but every three years is probably reasonable," she said.

She said while many schemes have a provision to pay a pension to a cohabitee, it can't always be assumed that the scheme member wanted them to receive their benefits. "You can't make the assumption that people who are living together are financially interdependent. There are all sorts of reasons for living with other people," she noted.

Nonetheless, she believes unmarried partnership is probably much more common now than when most scheme rules were written several decades ago. The Office for National Statistics recently released figures for England and Wales showing that between 1972 and 2018, the annual number of opposite-sex marriages fell by 46.5% to be the lowest on record in 2018.
 

 

 

Although Anglian and the trustees did not breach any of the current laws around equality, the case still leaves the question of whether scheme rules can be seen to be out of step with societal values.  

 

In Walker v Innospec, the Supreme Court had ruled in 2017 that same-sex spouses could no longer be denied a spouse’s pension for pre-2005 service – the year the Civil Partnership Act came into force – overthrowing an exemption in the Equalities Act, and reflecting more closely where society had moved to on gay rights. 

 

The question of whether or not couples must be married is a topic on which views have similarly shifted; just a few years ago it would have been considered impossible to have an unmarried prime minister living and having a child with a partner at Number 10 as Boris Johnson has done, for example, although he has since married his partner.

 

The Brewster case was seen by some in the industry as a step on the path towards 'more equal' treatment for unmarried partners when compared with members who are married or in a civil partnership, noted senior counsel at law firm Sackers, Arshad Khan.  

 

Therefore this latest ombudsman case “might be viewed as a bump or even a barrier in that path in the context of schemes in the private sector, given the way the PO distinguishes between public and private sector when considering the application of the Human Rights Act,” he said. 

 

The issue of scheme rules stipulating that unmarried couples must fill in a nomination form while married or ‘civil partnered’ couples do not need to do this is a live one, he said, having seen various rules where this is still the case. 

  

“What this case may shine a light on is how well known (if at all) is the need to nominate a partner and whether the member in question was given the opportunity in practice to nominate someone,” for example as part of their retirement pack, he said, warning that in general terms, any failure to provide relevant information could be classed as maladministration. 

  

However, what the case does not delve into is the continuing and substantive difference in benefits that can arise between married and unmarried couples, which some may find increasingly difficult to justify. 

 

“Trustees often have to exercise judgments or discretions to try and resolve what might be seen as unfair distinctions in the rules but ultimately, they have to follow their rules,” said Khan. 

 

Are rules requiring nominations for unmarried partners due for a court case?

Mark Grant

Georgina Stewart

Chantal Thompson