Tory MP Mike Freer: Gay people are being short-changed when it comes to pensions equality

Illustrated rainbow pride flag on a pink background.

Writing for, Conservative MP Mike Freer says it’s wrong that gay couples continue to be treated unequally in the area of survivor’s benefits.

Two men walk into a bar. Both put £20 on the bar, one man is served a pint and the other is served just half a pint. You’ve guessed it, the gay man gets the half pint. I dramatise and over simplify to make the point, that when it comes to some pensions, gay men and women are being short-changed. So what is the issue?

Pensions are complex and few of us take the time to understand them until it is too late. The basic problem is that if one partner in a civil partnership dies, the surviving partner receives significantly less than if the surviving spouse had been straight. This is predominantly in a type of pension known as a ‘contracted in’ scheme. A straight widow/widower receives pension benefits calculated to when his or her husband/wife joined the pension scheme. A surviving civil partner receives pension benefits only back to 2005 when civil partnerships became law.

The decision not to address this discrimination in the provision of occupational pension benefits is on the grounds that an equalisation of treatment would entail an unforeseen cost to pension schemes. Yet all aspects of pension schemes have unforeseeable costs. Longevity, how many members will get married, how many will die in service, how long they will live after retirement and how many widows/widower pensions they will have to pay out when a retired scheme member dies? That’s why we have actuaries!

Yet the Department for Work & Pensions believes gay men and women (who contribute into their schemes at the same rates as their straight colleagues) should get different entitlements for their “widows/widowers” when they die in retirement. So what’s the gap? Is it that important? Liberty, the civil rights organisation, has been undertaking excellent work in this area. They have a client, John Walker, who recently won his legal battle to secure equal pension benefits for his civil partner.

The Employment Tribunal found that an occupational pension scheme providing that John’s civil partner could only benefit from pension rights accrued since the time when civil partnerships became available in the UK was directly discriminatory. John and his civil partner have been together for 20 years and registered their civil partnership at the first possible opportunity, yet the pension scheme sought to restrict the survivor benefits available to John’s partner to £500 a year. Bizarrely If John Walker dissolved his civil partnership and married a woman, she would immediately be entitled to £41,000 per annum in the event of his death!

The Department for Work and Pensions estimate that the cost of parity would be £18 million, which is a blip in the costs facing the pensions industry. So I thought I would contact all the pension schemes in the UK to find out how they treated civil partners. Not least to see if the £18m cost was accurate. Neither the Commons Library nor the National Association of Pension Funds can provide me with a list of all pension schemes. So I do not understand how DWP can have calculated the cost. That’s why I have asked them to provide a list of all the relevant pension schemes and details of how they calculated the £18m cost. They will have to justify their figures or admit they were estimated (or someone less charitable would say – made them up!)

Many schemes do offer equality and only a minority don’t. But anyone in a pension scheme should contact their scheme administrators and check the entitlement of surviving civil partner spouses.  So at the moment it’s equality of contribution but inequality of pension benefits and so the campaign continues.

Mike Freer is the Conservative MP for Finchley and Golders Green.