This EU legal victory for gay partners over pension rights could backfire

Employers who provide pension schemes for their staff could soon be facing "massive" additional costs as the result of EU court rulings, according to a leading pensions lawyer. Jane Wolstenholme, a partner at solicitors Wedlake Bell, says employers who have been sticking to the letter of the law may find the very basis of that law unsound. In April, the european Court of Justice ruled in favour of Tadao Maruko, 65, a gay man from Germany. For 12 years, he lived with hans hettinger, theatre costume designer, until hettinger's death in 2005. The two men became "life partners" - the equivalent of civil partners - a few months after German law first permitted this in 2001.

As hettinger had paid into the theatre industry's pension scheme for 45 years, Maruko applied for a survivor's pension worth £5000 a year. he was unsuccessful because the scheme did not cover samesex partners. Upholding his challenge, the EU court held that this restriction amounted to discrimination on grounds of sexual orientation in EU countries where the status of life partners is comparable to that of spouses.

Although occupational pension schemes in Britain already provide benefits to surviving civil partners, these may not be as generous as widows' or widowers' pensions. When calculating entitlements, employers are permitted to ignore employment before December 2003, when new regulations were introduced - or perhaps December 2005, when civil partnerships were first allowed. That means the surviving civil partner of a long-serving employee may receive a pension based on just a few years' service.

David Pollard of law firm Freshfields says that a public body - one regarded as an "emanation of the state" - may have to change its pension scheme if this includes time limits that can count towards calculating death benefits for registered civil partnerships.

Other employers do not have to comply directly with the european equal Treatment Directive, Pollard adds, but Britain may decide to amend the equality regulations in line with the EU ruling. That, in itself, would not be particularly expensive for employers until there are more civil partners in Britain.

But what if EU laws were extended to cover age discrimination throughout the period of an employee's service? Currently, age-discrimination laws do not apply to employment before December 2006.

But Wolstenholme says that another German case, this time brought by a widow, may be a sign that this is about to change. Birgit Bartsch, 43, was 21 years younger than her husband, who died in 2004. His employers, the Bosch and Siemens household appliances group, refused her a widow's pension because company policy excluded cases where there was an age gap between the spouses of more than 15 years.

Birgit Bartsch claimed that this breached equality principles. Although her claim is likely to fail because her husband died before Germany implemented the relevant directive, the British advocate general at the eU court, eleanor Sharpston QC, has advised her fellow court members that an age restriction of this kind would breach EU law. The judges may well accept her opinion.

"These cases open the door to legal challenges which are likely to be hugely costly for employers," according to Wolstenholme. "Having thought that they didn't need to worry about the past, they could now face the prospect of paying equalised retrospective benefits going back decades to huge numbers of members and members' partners."

All this sounds like good news for civil partners as well as older husbands with "second-time-around" families. But employees should not celebrate too soon, Wolstenholme adds. The credit crunch may force companies to economise.