What is a civil partnership?
In England and Wales, civil partnerships have been available to same-sex couples since 2004, and opposite-sex couples since 2018.
Registering a civil partnership gives your relationship legal recognition, giving you added legal rights and responsibilities as a couple.
Whether you've already tied the knot or are considering making things official, here we look at just some of those legal rights including implications for pensions.
Bear in mind the information below does not constitute financial advice. It is not a comprehensive guide to your pension rights, but it does provide examples that show the complex and changing nature of pensions and related legislation.
How can a civil partnership affect your pension?
Entering a civil partnership can impact your pension in a number of ways. For example, you may become entitled to survivor benefits from your civil partner’s workplace pension if they die.
Registering a civil partnership can sometimes override any previous beneficiary nominations made for death in service grants or personal pension funds. So, you may need to review your beneficiary information to ensure it is up to date.
If a civil partnership ends, your pensions can be divided as part of a financial settlement. Much like in the case of a marriage ending in divorce.
Defined benefit pensions – survivor benefits
Defined benefit (DB) schemes, like the Teachers’ Pension Scheme and NHS Pension Scheme, are a type of workplace pension which guarantees you a specific income throughout your retirement.
When it comes to survivor benefits, they now work in a similar way to that of married couples.
Survivor pensions
When you enter a civil partnership, you become legally entitled to survivor pensions and lump sum death benefits, with equal rights to those of married couples.
A regular pension will usually be paid to surviving civil partners. For public sector schemes, this will usually be calculated as a percentage of the accrued pension entitlement. This is index-linked and payable for life.
Lump sum death benefits
Your civil partner may be entitled to a tax-free lump sum if you die before the age of 75.
If you pass away while you’re still working, your partner may be entitled to a death in service grant. This is often equivalent to two to four times your pensionable salary.
If you die within five to ten years of drawing your pension, a lump sum may also be issued.
Scheme-specific rules
While married couples of civil partners hold similar statutory rights when it comes to pensions, there are one or two potential differences when it comes to specific schemes.
Firstly, for periods of service prior to 1997, survivor pensions for same-sex couples were restricted. However, most public sector schemes have made their benefits equal for civil partners and married spouses.
Secondly, while the survivor pension will be automatically registered to the surviving civil partner, lump sums work slightly differently. That’s why it’s important to ensure your nomination form is up to date.
The equal treatment of civil partners and same-sex spouses in pension schemes has been shaped by a number of legal developments and court rulings over recent years. Further information is provided in the background section at the end of this guide.
Personal pensions and defined contribution pensions
Defined contribution (DC), or personal pensions, work differently to DB pensions as your contributions are used to build up a pot of money over time that is invested. This money is then used to provide your income in retirement.
As with DB schemes, survivor benefits from civil partners now work in a similar way to that of married couples. However, there is generally a difference between what your partner or beneficiaries will receive depending on when you pass away.
What happens if I die before taking my pension?
If you pass away prior to claiming your pension, as a beneficiary, your civil partner can claim the full value of your pension pot. The pension may be taken as a lump sum, set up as a drawdown pension or the funds could be used to purchase an annuity.
The money from the pension will usually be paid out tax-free provided you have died before the age of 75, and your beneficiary has let the pension provider know within two years of your death.
If you pass away after age 75, the money your beneficiaries receive will be taxed as income at their marginal tax rate.
What happens if I die after taking my pension?
If you’ve begun to draw your pension before you pass away, any unused funds can be passed directly to your civil partner or spouse. This is usually tax-free if you die before age 75 but will be taxed as marginal income if you are over 75.
If you plan to pass your unused pension to anyone but your legal partner, the money will become subject to inheritance IHT from 6 April 2027.
To ensure your pension goes to the person or people you would like, you should review your nomination or expression of wish form with your provider.
State pension – survivor benefits
In terms of the state pension, the survivor of a same-sex marriage or civil partnership is treated the same as a man whose wife has died, regardless of their gender.
A surviving civil partner may also be able to inherit part of the late partner’s additional state pension if the civil partnership with them began before 6th April 2016, and one of the following applies:
- your partner reached the State Pension age before 6th April 2016
- your partner died before 6th April 2016 but would have reached State Pension age on or after that date.
Note that you wouldn’t be able to inherit anything if you were to remarry or form a new civil partnership before you reach State Pension age.
Your rights when living and working abroad
Opposite-sex marriage is recognised as a legally binding agreement across the world. Some countries, however, still don't recognise civil partnerships or same-sex marriages.
If you choose to live or work abroad, you'll need to understand how your status is recognised in the country you're planning to move to.
This could affect your rights in a number of ways. It could have an impact on your finances as a couple and even affect your status as the legal parents or guardians of any children you have together.
Background to these pension rights
The pension rights available to civil partners today have been shaped by a number of legal and regulatory developments.
In Walker v Innospec Ltd (2017), the Supreme Court ruled that survivors in civil partnerships and same-sex marriages should receive the same pension benefits as survivors in opposite-sex marriages.
A later case, Goodwin v Secretary of State for Education, led to further changes to the Teachers' Pension Scheme to address differences in survivor benefits and ensure equal treatment.
These cases helped establish the principle that pension benefits should be provided equally regardless of sexual orientation or the type of legally recognised relationship.