CONSULTATION
RESPONSE
HM Treasury
Review of Survivor Benefits in Occupational Pension
Schemes under the Marriage (Same Sex Couples) Act 2013
23 May 2014
1. The NASUWT welcomes the opportunity to comment on HM
Treasury’s Review of Survivor Benefits in Occupational Pension
Schemes under the Marriage (Same Sex Couples) Act 2013.
2. The NASUWT is the largest teachers’ union in the UK.
3. The overwhelming majority of NASUWT members are members of the
teachers’ pension schemes of England and Wales, Scotland and
Northern Ireland. The NASUWT will therefore comment on survivor
benefits in the Teachers’ Pension Schemes (TPS) in England and
Wales and Scotland.
GENERAL COMMENTS
4. The Treasury review of pension survivor benefits is carried out under
Part 2 Section 16 of the Marriage (Same Sex Couples) Act 2013, which
states:
16 Survivor benefits under occupational pension schemes
(1) The Secretary of State must arrange for a review of the following matters
relating to occupational pension schemes—
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(a) relevant differences in survivor benefits;
(b) the costs, and other effects, of securing that relevant differences in
survivor benefits are eliminated by the equalisation of survivor
benefits.
(2) For the purposes of this section, each of the following are relevant
differences in survivor benefits—
(a) differences between—
(i) same sex survivor benefits, and
(ii) opposite sex survivor benefits provided to widows;
(b) differences between—
(i) same sex survivor benefits, and
(ii) opposite sex survivor benefits provided to widowers;
(c) differences between—
(i) opposite sex survivor benefits provided to widows, and
(ii) opposite sex survivor benefits provided to widowers.
(3) The review must, in particular, consider these issues—
(a) the extent to which same sex survivor benefits are provided in reliance
on paragraph 18 of Schedule 9 to the Equality Act 2010;
(b) the extent to which—
(i) same sex survivor benefits, and
(ii) opposite sex survivor benefits,
are calculated by reference to different periods of pensionable service.
(4) The arrangements made by the Secretary of State must provide for the
person or persons conducting the review to consult such other persons as the
Secretary of State considers appropriate.
(5) The Secretary of State must arrange for a report on the outcome of the
review to be produced and published before 1 July 2014.
(6) If the Secretary of State, having considered the outcome of the review,
thinks that the law of England and Wales and Scotland should be changed for
the purpose of eliminating or reducing relevant differences in survivor
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benefits, the Secretary of State may, by order, make such provision as the
Secretary of State considers appropriate for that purpose.
(7) An order under subsection (6) may amend—
(a) England and Wales legislation;
(b) Scottish legislation.
5. The NASUWT welcomes the fact that the Treasury has invited
comments from trade unions on the Review. The Union trusts that the
Government will now recognise that it must meet in full its duties under
the Equality Act 2010 by ending discrimination in relation to survivor
benefits for same sex married couples who constitute a group with
protected characteristics under the legislation.
6. The NASUWT believes that previous Treasury calculations of the cost
of equalising relevant differences in survivor benefits have been at best
misleading, and the Union asserts that the costs of ensuring
equalisation are entirely affordable. In any event, the Union suggests
that the legality of continuing to discriminate against same sex married
couples on grounds of affordability is vulnerable to challenge.
SPECIFIC COMMENTS
7. The NASUWT has long campaigned for full equalisation of survivor
benefits in the TPS. The NASUWT opposed the exemption in the
Equality Act 2010 (Schedule 9) which discriminated against civil
partners compared with married partners.
8. The NASUWT has rejected the Coalition Government’s reform of
teachers’ pensions enacted in the Public Service Pensions Act 2013.
The NASUWT believes that no justification for the reforms has been
presented by the Coalition Government. The NASUWT also rejected
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the Proposed Final Agreement for the TPS (TPS PFA) and is in dispute
with the Secretary of State over these changes.
9. The NASUWT welcomes the recent engagement by the Department for
Education (DfE) in a programme of talks on the trade dispute
implications arising from the implementation of government policies
affecting teachers, including reforms to teachers’ pensions. The
NASUWT acknowledges that the DfE has been willing to engage in
constructive discussions on this issue.
10. Recent developments are in marked contrast to the situation which
pertained in November 2013 where the DfE announced its intention to
continue to discriminate in the matter of survivor benefits in the
reformed TPS. The NASUWT opposed the DfE proposal at that time
that secondary legislation, to be made by the Department for Culture,
Media and Sport (DCMS), within which the Government Equalities
Office sits, will, amongst other things, insert textual amendments to the
Teachers’ Pensions Regulations to retain the current policy that public
sector pension schemes treat same sex married couples as civil
partners, and not as opposite sex married couples.
11. The current situation in the TPS is that civil partners are treated less
favourably than some married couples in respect of survivor benefits.
The benefits for civil partners are equal with those of married partners
but only in respect of those for widowers, which include any service
since 6 April 1988, rather than for widows, which include service from 1
April 1972.
12. Therefore, in effect, civil partners have the same pension rights as
married couples, albeit female scheme members and their widowers.
Civil partners do not currently have the same pension rights as male
scheme members and their widows. The backdating of civil partners’
pension rights to 1988 clearly does not amount to equal treatment with
all married couples.
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13. The NASUWT does not accept that same sex married couples should
be treated as civil partners, unless civil partners are given the same
pension rights as male scheme members and their widows. In addition,
the NASUWT considers that female scheme members and their
widowers should be given the same pension rights as male scheme
members and their widows.
14. For the avoidance of doubt, therefore, the NASUWT considers that
widows, widowers, civil partners and same sex married couples should
all have equal pension rights, including survivor benefit rights, and that
the equalisation of survivor benefit rights must include service which is
backdated to 1 April 1972 in the calculation of those rights. To do
otherwise would mean perpetuating an unacceptable form of
discrimination against women and LGBT teachers.
15. When responding to the NASUWT and TPS members’ representations
on this issue, the DfE drew attention to the Government’s review of
survivor benefits in occupational pension schemes under the Marriage
(Same Sex Couples) Act 2013 and confirmed that it will, as would be
expected, comply with the outcomes of that review. The NASUWT
considers that it would be untenable for the current Government review
to conclude that discrimination should continue.
16. Some pension schemes already pay exactly the same survivor benefits
to spouses, civil partners, unmarried partners and unmarried same-sex
couples on a voluntary basis. In its response to the consultation on
equal marriage, the Government estimated that two-thirds of schemes
did so.1 More recently, the Department for Work and Pensions has
1
Para 9.19,
www.gov.uk/government/uploads/system/uploads/attachment_data/file/133262/consultationresponse_1_.pdf
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estimated that one-third of contracted-in defined benefit private sector
schemes provide equal survivor benefits.2
17. The NASUWT understands that the Coalition Government claims that
to backdate survivor benefits prior to 1988 for public service pension
schemes would “entail an unforeseen retrospective cost to schemes in
a challenging economic climate when schemes are already under
significant pressure.”3 The NASUWT does not believe that this is the
case for the TPS.
18. The Government claimed in evidence it submitted for the case of R (on
the application of Iain Cockburn) v Secretary of State for Health [2011]
EWHC 2095 that the cost of providing widowers’ survivor benefits in
respect of service prior to April 1988 would be
£1,350m for the
England and Wales TPS and £140m for the Scotland TPS. This figure
is now three years out of date, which is significant as costs will reduce
over time.
19. The Government Actuary’s Department (GAD) has provided more
recent costings to HM Treasury for the purposes of this Review. In
providing this advice, GAD accepts that the ‘extensive data collection’
necessary to provide accurate costings has not occurred. Instead, GAD
has used the data available for the public service pension scheme
preliminary valuations. GAD has concluded that the capitalised cost to
all of the public service pension schemes could be as low as £1.3
billion, but has settled on an eventual figure of £3.2 billion.
20. Working on the £3.2 billion figure, the assumptions provided to HMT by
GAD for the purposes of this review indicate that the capitalised cost to
the TPS would be in the region of £600m with between one-third and a
2www.gov.uk/government/uploads/system/uploads/attachment_data/file/210859/Ad_hoc_analysis_civil_
partners_survivors_benefit_010713.pdf
3
Para 1.10 ww.gov.uk/government/uploads/system/uploads/attachment_data/file/133258/consultation-
document_1_.pdf
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half of this being in respect of back-dated payments.4 The letter also
suggested that the whole of the capitalised cost across all public
sectors schemes would add around 0.2% of pensionable pay to
employer contribution rates over a 15 year term.
21. The NASUWT believes that presenting assumptions about future
scheme liabilities as capitalised costs is fundamentally misleading and
serves to exaggerate the cost of equalisation of survivor benefits. The
NASUWT
also
has
serious
reservations
about
the
actuarial
assumptions which the Treasury has adopted when arriving at its
costings.
22. In email correspondence to the TUC on 9 April 2014, the Treasury has
described its actuarial assumptions as follows:
For all valuations GAD will make an assumption about the proportion of
scheme managers (sic) who will be married to an eligible survivor at death
(since this is the point that survivor benefits come into payment). These
assumptions will vary from scheme to scheme, and will be largely informed by
the scheme’s observed experience (i.e. the proportion of scheme members
that were married at death in the past).
For the new costs estimates which will inform this review, GAD are having to
make further assumptions about the proportion of scheme members that will
be married to a same sex partner or in a civil partnership on their death (there
is currently little experience data to inform this). These assumptions will be
based on ONS data on the number of civil partnerships in the general
population, and will also be informed by the assumption (which is being used
in all Govt analysis) that there will be no long-term overall increase in the
number of same sex partnerships as a result of the introduction of marriage
for same sex couples. To complete the analysis, GAD will also need to make
additional assumptions about the age differences between same sex couples,
and life expectancies for same sex members/survivors.
4
Government Actuary’s Department, Survivor Benefit review 22 April 2014
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23. It appears that, certainly in respect of its assumptions about the cost of
equalising widowers’ and widows’ survivor benefits, GAD has missed
the most obvious factor - that costs will reduce in time as the amount of
service prior to 1988 reduces. For example, a teacher who began TPS
membership in 1972 when they were 22 would be 65 in 2015. Given
that their TPS normal pension age would be 60, it is unlikely that a
significant number of teachers are in this category.
24. A teacher who began their service in 1988, aged 22, would be 49 in
2015 and, depending on their exact age, would possibly receive some
tapering transitional protection. The teacher would have a normal
pension age of 67 and, if they worked to their normal pension age,
would retire in 2033. It is not inaccurate to say that, by 2033, the costs
of equalising survivor benefits will have been squeezed out of the
system because the numbers of teachers working beyond 67 will be
very small. The current intention of government, of course, is to
increase the pension age to 68 in approximately 2036 but this will not
involve any more pre-1988 service counting towards pension benefits
than in 2033.
25. Furthermore the adult dependants of those teachers aged between 38
and 60 in 1972 are likely to now be deceased. There will therefore be
no costs associated with such dependents.
26. The NASUWT has also raised with GAD whether the assumptions
have properly taken into account that many female teachers aged
between 22 and 37 in 1972 would be likely to have left the TPS for
periods of time due to child care responsibilities.
27. Furthermore, many female TPS members with service prior to 1988 will
have
been
part-time.
Because
part-time
teachers
were
not
automatically enrolled in the TPS, many did not elect to join the
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scheme and the NASUWT can see no evidence that this has been
taken into account in the GAD assumptions.
28. Furthermore, as a result of these features of TPS membership, the
NASUWT has contested the accuracy of the assumption that between
one-third and a half of the costs occur as a result of back-dated
payments to equalise widowers’ benefits.
29. The DfE has stated in the TPS PFA that it expects teachers to retire at
the same time as they previously would have before TPS reform up to
2023. This will further reduce the amount of service prior to 1988 which
counts towards pension benefits.
30. At the Treasury Round Table meeting with the trade unions on 31
March 2014, the Treasury accepted that the cost for the TPS of
backdating service to 1972 for civil partners and same sex married
couples would be relatively small when compared to the cost of
backdating service to 1972 for widowers. This has been confirmed by
the advice provided to The Treasury by GAD. The NASUWT therefore
believes that the Government should firmly commit now to backdating
service to 1972 for civil partners and same sex married couples.
31. Even if the NASUWT were to accept, at face value, the Treasury’s
current figure of £600m as the cost of future liabilities for backdating
service to 1972 for widowers in the England and Wales TPS, the
NASUWT believes that this is affordable.
32. The England and Wales TPS has 646,070 members, which, with a total
cost of £600m, gives a cost per member of approximately £928, or less
than £62 per year when spread over 15 years. The cost per member,
spread over 45 years, is less than 40 pence per week.
33. The NASUWT observes that the DfE’s proposed post-2015 employee
contribution structure does not attempt to secure the maximum
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employee pension contributions possible from the highest paid scheme
members.5 Even if this continues to be the case, the NASUWT believes
that it is more than likely that all survivor benefits can be backdated to
1972 without any breach in the employer cost cap.
34. In particular, the interim findings of the preliminary valuation for the
reformed TPS are that employer costs will fall drastically as the current
final salary element of the TPS reduces. The TPS contribution structure
could be designed to weight the costs of full equalisation of survivor
benefits so that these are largely borne by employers after the second
and third scheme valuations.
35. The NASUWT also believes that there is a responsibility on
Government to meet the costs of any backdated payments, in public
service schemes, that would fall to being paid in a short timeframe
should the decision be taken to equalise all benefits. The Union
understands from the GAD letter to the Treasury that current
assumptions are that these may amount to approximately £1bn across
all schemes and approximately £230 million for the TPS. The Union
again believes that this is clearly affordable in the context of
Government spending and that a total of some £4.5bn has been found
this year within the education budget for Universal Infant Free School
Meal, free schools, fair funding for low funded local authorities and the
Priority Schools building programme. Clearly, if the example adopted in
the GAD letter to the Treasury, of 0.2% being added to employer costs
over a 15 year period is adopted, contributions to the scheme will
eventually cover the cost of backdated payments.
36. The NASUWT strongly believes that such backdated payments should
be viewed as reimbursement of monies to public service scheme
members which have been unjustifiably withheld. Such backdated
payments should therefore not be viewed as a ‘new cost.’
5
DfE, Teachers’ Pension Scheme (TPS) Further regulations to complete reform, 28 April 2014
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Conclusion
37. The NASUWT believes that it is nothing short of scandalous that
discriminatory provision of survivor benefits has been in place in the
TPS since 1989. Discrimination against women teachers was added to
by discrimination against LGBT teachers, so that discrimination
became layered over discrimination. The NASUWT strongly believes
that such discrimination must now end and that the ending of that
discrimination is not only just, but is clearly affordable.
Chris Keates (Ms)
General Secretary
For further information on the Union’s response please contact:
Dave Wilkinson
National Negotiating Official
NASUWT
Hillscourt Education Centre
Rose Hill
Rednal
Birmingham
B45 8RS
0121 453 6150
www.nasuwt.org.uk
dave.wilkinson@mail.nasuwt.org.uk
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