Pension entitlements, co-habitants and death benefits

Clients need to check their pension entitlements

Two interesting cases were recently decided by the Pensions Ombudsman. The first illustrates how the entitlements of a surviving co-habitant and a spouse can lawfully differ under a pension scheme; and the second shows that whether a death takes place when the member is in service or as a retired member can be crucial in determining the amount of a surviving spouse’s benefits.

The Teachers’ Pension Scheme and Mr R

Mr R was the partner of Dr K who was a member of the Teachers’ Pension Scheme (the Scheme). They had lived together for many years but had never married. The Scheme had provided for widowers’ pensions since April 1988 and for nominated partners’ pensions from January 2007. Dr K had nominated Mr R as her partner but the pension he was entitled to under the Scheme rules following Dr K’s death  was calculated by reference to her service from 2007, unlike a widowers’ pension which would have been based on her full 38 years’ service.

Mr R complained in 2012 that he should be entitled to a pension based on Dr K’s full service; the complaint was not upheld. Following the Supreme Court decision in Brewster in 2017, Mr R made a new complaint arguing that Brewster established that pension schemes could not lawfully discriminate between married and unmarried couples so consequently he should receive a widower’s pension. Mr R also argued that a provision in the pension rules that required Dr K to pay increased contributions if she wished a partner to be eligible for a widower’s pension was also discriminatory.

The Ombudsman decided that neither the Human Rights Act 1988 nor the Brewster decision supported Mr R’s contention that unmarried couples are entitled to receive the same benefits as married couples. In Brewster the co-habitant had not been entitled to a pension because their partner had failed to put in place a nomination in their favour, a requirement in the case of unmarried partners. As there was no similar requirement for a married member to nominate their spouse, it was decided that the requirement to nominate an unmarried partner was discriminatory, and the surviving partner should receive a pension despite the lack of a nomination. However, according to the Ombudsman, Brewster does not prevent “pension schemes from introducing … criteria that distinguish between different categories of beneficiaries”. This was the case for the Scheme and thus Mr R was not entitled to a widowers’ pension.

Estate of Mr Y and Belfast City Council

In another recent case, Mrs Y in her capacity as administrator of her late husband’s estate complained to the Ombudsman about the handling of her late husband’s retirement which had left her with a substantially smaller lump sum and ongoing widow’s pension.

Mr Y had retired on the grounds of ill health with a 12 week notice period ending on 17 August. If Mr Y had died as a retired member, his widow’s entitlement would have been greater than if he had died in service. On 24 July Mr Y was given a medical diagnosis that his condition was terminal. Mrs Y contacted the Council to enquire about early payment of the lump sum due under the pension scheme. This was refused.

Mr Y died on 14 August, three days before his retirement, meaning that the lower death in service widow’s benefits were payable. Mrs Y argued that when she phoned the Council they should have advised her that the retirement date could be brought forward as had happened in other similar cases. The Council claimed that they were not made aware of how ill Mr Y was during the call but there was no call recording or contemporaneous notes to support this assertion.

The Ombudsman in upholding Mrs Y’s complaint decided that Mrs Y had conveyed the change in her husband’s medical condition to the Council, and that it knew enough to make a decision about waiving the remaining notice period and bringing the pension into payment earlier, so entitling Mrs Y to a higher level of benefits.

It should be remembered that the Ombudsman’s decisions are guidance and not binding precedents on the Pensions Ombudsman or its successor. However, both these decisions highlight the need for clients to check their pension entitlements and those of their partner carefully, consider the pension rules in the event of a terminal illness and ensure that they comply with the often complex rules.