Pension change benefits unmarried partners

This article by Andrew Bibby, in a slightly different form, was first published in The Observer, 2008

When it comes to pensions, marriage has become superfluous for many health workers and local authority staff. Changes introduced last month (April) to the NHS and local government pension schemes finally give cohabiting couples the same rights as those enjoyed by spouses and civil partners.

Mark Robson, an environmental health officer with a council in Norfolk, is among those celebrating the change. He and his partner, Jacky Armstrong, who also works in local government, have been in a relationship for seven years and live with their five-year-old daughter, Ellie. Both pay the same contributions as married couples into their pension scheme, but up to now they have not been able to qualify for spouses' pension rights - that is, the right to a partner's pension benefits after he or he dies.

'We've always thought it a bit unfair,' he says. 'People living together as partners is such a common feature of life. Our only difference is that we haven't been through a wedding ceremony.'

It's a change that Unison, the local government union, has also welcomed. 'It's a significant advance,' says Glyn Jenkins, its head of pensions. As he points out, pension rights for partners of people, such as Mark, in the Local Government Pension Scheme (LGPS) have now been brought into line with those payable to widowers and civil partners, with benefits in each case calculated according to pay and the number of years of LGPS membership back to April 1988 (a residual quirk of the pension rules allows widows alone to benefit back to 1972).

It is a similar story in the NHS pension scheme, where rights for unmarried partners also came in last month. Rather unfairly, however, the local government changes do not yet apply in Scotland. Council staff there will have to wait until April next year for their pension rules to change.

Even with the new rules, there is one important caveat that cohabitees need to understand: the new pension rights for benefits for unmarried couples apply only if both the employee and their partner have submitted the appropriate declaration form. Rights for unmarried partners will normally apply for relationships that have continued for at least a two-year period.

In recent years, concern over pension rights has been driving many in long-term unmarried relationships to reluctantly decide to tie the knot. However, last month's changes to the local government and NHS schemes mean that the vast majority of public sector pension schemes now recognise cohabiting partners.

For teachers, for example, the change came in last year as part of a new package updating their pension scheme. Civil servants in the Premium and Classic Plus pension schemes are also covered, as are those in the Nuvos scheme for new entrants.

While pointing out that benefits are intended for those in permanent relationships, the Civil Service Pensions administrators advise cohabiting members to consider completing a declaration even before they have been together for two years.

However, employees in final salary pensions in the private sector are rather less well served. Rules vary considerably between individual schemes, with only a minority automatically extending spouses' benefits to unmarried couples. The majority of schemes pay at the discretion of the trustees, so it is clearly important that employees make their pension scheme aware if they are living with a partner. Financial interdependency (rather than direct financial dependency of the partner on the employee) is normally the criterion considered.

There is also some evidence that the tide is moving against cohabitees in private sector pensions. Government statistics published last autumn reveal that, in 2006, half a million out of 3.2 million members in final salary schemes were in schemes that 'never' paid out to unmarried dependants. The equivalent figures two years earlier were 200,000 people out of 3.6 million.

For Mark and his partner, who are both in their mid-forties, the change to the local government scheme comes just at the time in their lives when they are becoming increasingly aware of the importance of pension provision.

'At my sort of age, it is top of the list,' Mark says, adding that he would now be cautious about moving to a job outside local government.

Though he says that it is possible that he and Jacky may decide to marry eventually, he feels it is wrong for couples to feel pushed into marriage simply to enjoy financial advantages.

For Unison's Glyn Jenkins, however, there remain some residual issues on his negotiating list. One problem with the LGPS, for example, is that the new rules do not apply for cohabiting couples who have already retired or left the local government pension scheme before 1 April 2008. 'We still have a problem there,' he admits.

The change of rules on cohabitees are part of a wider series of reforms of both the local government in England and Wales and the NHS pension schemes that came in last month, and which in broad terms balance better benefits with higher employee contributions.

For local government staff, the accrual rate for each year of service improves, but the rules on retirement age are becoming somewhat tighter. In the NHS, the normal retirement age of 60 continues except for new entrants, but more highly paid staff will now pay slightly higher pension contributions.