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Civil partnerships and your employee benefits package

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The introduction of the Civil Partnership Act (CPA) has brought a huge amount of media interest. This is certainly an important change in legislation for gay and lesbian employees, but what are the implications for the employee benefits package?



Background
The CPA came into force on 5 December 2005 and allows same sex couples to register their relationship formally with the state. Following registration, the couple will then have rights and responsibilities similar to married couples, particularly in relation to:

  • Tax.

  • Immigrations and nationality.

  • Inheritance.

  • Pensions and employee benefits (including state benefits).

The media has recently covered a rush of same sex couples taking advantage of the new rules and the government expects some 22,000 to register in the short to medium term. The gay rights pressure group, Stonewall, also expects the legislation to encourage more gay people to be open about their lifestyle and this is likely to include more openness in the workplace.

Effect on the employee benefits package
Although the CPA is a major milestone for gay and lesbian couples, the effect for benefit packages may be minimal. The main reason for this is that from 1 December 2003, The Employment Equality (Sexual Orientation) Regulations made it illegal to discriminate in the benefits package in respect of gay and lesbian employees.

The key difference with the CPA, however, is that it extends the rights of married employees to same sex couples who have entered a Civil Partnership and although becoming less common, many employers still provide different benefits to married employees. In short, if you provide any benefits specifically to married employees, these must be extended to civil partners.

Pensions
The key areas of action for many employers will be the pension scheme. The action you require to take will depend upon the type of scheme you have in place.

Group personal pensions schemes (GPPS) and stakeholders plans
If you currently sponsor a GPPS or a stakeholder scheme, it is unlikely that you have to take any action. The provider of the scheme will most likely be responsible for updating literature and as these type of schemes are in effect a collection of individual contracts, the provider will be responsible for ensuring compliance with CPA, particularly in terms of contracting-out benefits.

The only area where employers may need to take some action is where they have additional information about the pension scheme, either on their handbook, intranet or a specific scheme booklet. These may need updating, however, your adviser or provider should be able to provide you with updated wording.

Trust based occupational pension schemes
If you currently sponsor a trust based (that is run by a board of Trustees) pension scheme, you probably need to take more serious action to ensure you comply with CPA. Again the key is a test against what is provided for married employees. Important areas to consider are:

Spouses pension on death
Many schemes provide an automatic spouses pension on a scheme member’s death (whether a pensioner or an active employee or not). They may also provide a benefit to a non-spousal dependant, but this is often at the discretion of the Trustees. If such a benefit is provided, this needs to be extended to Civil Partners as well as married members, although, where this benefit is service related, this only needs to take into account, service from 5 December 2005 (except contracted-out benefits – see below).

Contracting-out
If your scheme is contracted-out of the state second pension (S2P), then Civil Partners are also entitled to contracted-out benefits in respect of their partner’s contracted out service accrued from 6 April 1988.

Scheme rules
There is no requirement under the CPA for Trustees to amend pension scheme rules as the CPA is overriding legislation with which the scheme must comply. To avoid confusion and potential discrimination, however, Trustees may feel it is best practice to make necessary amendments.

Potential costs
If your scheme is of the final salary type there may be some additional costs in providing benefits for civil partners. This will be dependant upon the assumptions your actuary has made and you should seek their guidance.

Dissolution of a civil partnership
When a civil partnership is dissolved, registered civil partners will be entitled to a pension sharing order in the same way as married couples who divorce. Documentation may need to be updated to reflect this.

Other employee benefits
Other common employee benefits may also be affected:

Private medical insurance
Where cover is extended to married employees (as opposed to any “dependant”) this must also be provided to civil partners

  • Marriage payments or gifts or additional marriage of honeymoon leave.
  • Christmas parties for employees and spouses.
  • Staff discounts.

Synopsis
The acid test for compliance with the CPA is to check for any aspect of the benefit package where there is any differentiation for married employees. Should any be discovered, employers need to ensure that these benefits are extended to civil partners.

If in any doubt, specific advice should be sought from your actuary, benefit consultant, IFA or employment lawyer.

Sean McSweeney is Head of Employee Benefits Strategy at Caversham Buchanan Limited.

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Annie Hayes

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