This is an important question that many people are asking. The answer can be complex, and depends on two things:
- What is the legal status of your relationship
- What type of pension plan do you hold
Let’s look at the relationships first. There tend to be the following relationships:
- Husband and wife – male and female
- Co-habitation – male and female
- Married – same sex
Same Sex Marriages
A gay man, John Walker won a landmark ruling in the UK which will give his husband the same pension rights as a wife would receive. The UK Supreme Court unanimously ruled on 12th July 2017 that if John Walker, 66, dies, his husband is entitled to a spouse’s pension, provided they remain married.
BBC legal affairs correspondent Clive Coleman said the decision will have “a dramatic effect on the entitlement of thousands of civil partners and spouses in same sex marriages”.
The Ruling means Mr Walker’s husband – who is in his 50s would be entitled to a spousal pension of £45,000 a year in the event of his death, rather than £1,000 a year. Mr Walker worked for a UK chemical company Innospec until he retired.
In Ireland, Lesbian and Gay couples are still being discriminated against.
“We passed the Marriage Referendum and we have a new Government but not everything has improved for lesbian and gay couples” , says Fergus Courtney of Pension Equality.
No doubt there will be more debate in Ireland following Mr Walker’s successful legal challenge.
Senator Ivana Bacik has introduced a Bill known as the Pensions (Equal Pension Treatment in Occupational Benefit Scheme) (Amendment) Bill 2016 and it is believed that the Government are now generally positive towards the proposed legislation.
Things are not entirely straightforward for same sex couples and a lot depends upon their marital status and the type of pensions that they hold.
Since the 1970s when many pension scheme rules were devised, unmarried co-habitation has emerged as a statistically significant form of family is now widespread.
Old Mutual Wealth pension expert, Jon Greer, says
“For individuals who hold a defined benefit pension, the message is clear that they should not make any assumption about who will inherit the pension if they pass away. Always check the scheme provisions, as there will be qualifying conditions that apply to survivors’ pension particularly for co-habiting partners”.
Death benefits are particularly important if you are not married and you are relying on a nomination to the pension managers by your partner, rather than an automatic right to a spouse’s pension. This is particularly relevant if one of you has been married before – you don’t want an ex-spouse collecting any widows/widowers pension if the pension holder dies.
So, if one or other of you is in a Company Pension Scheme, do check now if your partner would receive your pension benefit whenever you die
Husband & Wife
Generally this is fairly straightforward. In a Company Pension Scheme, the benefit on death would be payable to a spouse. This is further protected in the event of a marriage break-up when a Court can approve a Pension Adjustment Order PAO. The Court may serve a binding order known as a pension adjustment order on the trustees or provider of a pension arrangement of which either spouse is a member, requiring a proportion of the pension benefits to be paid to the other spouse for the benefit of a dependent member of the family.
Different types of pension plans will provide different results for partners.
- If you are a member of an occupational pension scheme, either Defined Benefit or Defined Contribution, the scheme may provide a pension for your spouse or civil partner – civil partners, take note, check your status with the Trustees.
- If you are self-employed, married and die before your retirement age the benefit will transfer to your wife. Non married couples should take account of their pensions in their Wills.
- Post retirement, an Approved Retirement Fund can transfer to a spouse or to a civil partner. Alternatively the ARF can go to children. Children under 21 may be liable to Capital Acquisitions Tax. If the children are over 21 then income tax applies.
An annuity is a contract with a life company whereby they guarantee to pay you a regular pension income for the remainder of your lifetime in return for a fixed sum at outset. The rate is fixed at the beginning with no option to alter once purchased. On death, there will be no income paid to your estate or spouse unless a guaranteed period still applies or a dependant’s pension has been purchased at the outset.
It’s well worth checking the rules on your partner’s pension to ensure financial security for you and your family.
We have provided pension advice for a wide range of clients – married, unmarried, and divorced, and we’d happy to help you if you require assistance.