Calculating a transgender pension scheme member's benefits

27 February 2020

Transgender rights are moving up the political and social agenda. Government statistics suggest that more individuals are choosing to identify with a gender which is different to that assigned at their birth. This Insight considers the specific complexities around calculating a trans member's pension benefits.



What is the issue?

The Government estimates that between 200,000 and 500,000 people identify their gender as different to that assigned at birth. This is generally accepted to be a conservative estimate. It is believed that people identifying as transgender (trans) is on the increase.

Laws have been in place for a number of years which look to protect transgender people in the workplace. Transgender people have protections under the Equality Act 2010. Important protections also exist through the Gender Recognition Act 2004. Employers and pension scheme trustees should think about the steps to take to ensure they do not discriminate against trans employees and pension scheme members.

This is a particular issue for defined benefit occupational pension schemes. Members' benefits are calculated taking into account periods of pensionable service over the period of scheme membership. For a transgender member, part of that period of pensionable service may have been as one gender, and part of it may have been in another gender. This is an issue because historically pension scheme benefits commonly built up on a different basis depending on the member's sex.

Key action points for trustees/employers

1. Employers and trustees should ensure transgender people are not being discriminated against in the workplace. unlawful discrimination can happen at all stages of the employment relationship, including in the provision of pensions and how they are calculated

Gender reassignment is a protected characteristic, alongside the other protected characteristics such as age, race, sex, sexual orientation and disability in the Equality Act 2010. The law gives wide-ranging protection to those who are proposing to undergo, are undergoing, or who have undergone gender reassignment by changing physiological or other attributes of sex. The protection is broadly worded. There is no requirement for someone to have undergone medical procedures in order to benefit from the protection.

The protection runs through the entire spectrum of the employment relationship - protecting job applicants, employees and workers, and continues to provide protection at, and following, termination of the employment relationship. Trans individuals should not be discriminated against in the provision of terms and conditions and benefits, including pensions.

There is a specific provision contained in the Equality Act 2010 requiring occupational pension scheme trustees to imply a non-discrimination rule into their pension scheme rules, where the rules would otherwise be discriminatory. This places a direct obligation on trustees and scheme administrators to ensure that benefits are not being calculated in a discriminatory manner.

The Gender Recognition Act 2004 gives a separate, and additional, layer of protection. If someone applies for, and is granted, a gender recognition certificate (GRC), their affirmed gender becomes for all purposes their gender from the date of the GRC being issued.

There is no requirement for a trans person to apply for a GRC. It has no bearing on whether or not they gain protection under the Equality Act 2010 provisions. It can be relevant to the calculation of a pension scheme member's benefits, but is not determinative.

Relatively few trans people hold a GRC, by comparison with the trans community as a whole. Government figures show that fewer than 5,000 GRCs have been issued to date. The Government has recently concluded a consultation into ways of making the process of applying for a GRC more user-friendly.

2. One of the key concerns when pension benefits are calculated is ensuring the right treatment of an individual's pensionable service

All defined benefit pensions are calculated by reference to the member's age, length of service and their assigned gender on a system. This calculation is more complex if a member changes their assigned gender during the period of pensionable service (or subsequently).

The Gender Recognition Act 2004 makes provision for pensions and other benefit entitlements. It alters the entitlement to the benefits applicable to the affirmed gender, where there is a difference in entitlement between the sexes, from the date the gender recognition certificate is issued.

The Act is not as clear as it could be in relation to how occupational pension benefits should be dealt with for trans people. In particular, it doesn't spell out how pension benefits which built up before a trans member gained a GRC should be treated, or indeed what to do if a member has chosen not to apply for a GRC.

An additional complexity arises from the fact that occupational pension schemes have, historically, not treated male and female members equally. In the past, it was common for female members to have more generous benefits based on an earlier normal retirement date of (for example) age 60 (with males retiring at, for example, 65).

Trustees of defined benefit occupational pension schemes have been required, since 17 May 1990, to ensure that, from that date their schemes do not discriminate on the grounds of sex as between male and female members. This follows the seminal Barber v Guardian Royal Exchange decision. This has led to years of complexity as trustees and scheme sponsors have taken steps to ensure equal treatment as between pension scheme members on the grounds of sex.

This therefore becomes an issue for an individual who may have changed their gender. In particular, this can be an issue where trans members have periods of pensionable service that predate and postdate 17 May 1990. How should they be treated for their periods of pensionable service?

3. There are a number of factors that trustees need to think about when deciding how to calculate a trans member's benefits

When determining a trans member's pension entitlement, trustees should consider a number of factors, including:

  • whether the member has a GRC. This is not determinative, but can be helpful. If a member has a GRC, their pension benefits should be calculated on the basis of their affirmed gender from the date of the GRC;
  • in the absence of a GRC, whether there is a date when the trustees can reasonably conclude that the member transitioned from their gender assigned at birth, to their affirmed (chosen) gender;
  • what the scheme rules say (if anything) about how a trans member's benefits are to be calculated (also taking into account the implied equality rule in section 61 of the Equality Act 2010);
  • how the Department for Work and Pensions (DWP) is treating the member in question for the purpose of calculating the member's guaranteed minimum pension (GMP), if any, as this might help inform the trustees' decision on how to calculate the pension benefits; and
  • importantly, the sponsoring employer's view. In our experience, an employer's HR, pensions team and trustees will want to work together to ensure the best outcome, and where possible, consistency with previous and future cases. The employer should also be involved because there may be additional costs, depending on how the member's benefits are to be calculated (where this is different to the basis on which the actuary has previously calculated the benefits).

This is a complex area, and we recommend that you take legal advice on your options to avoid giving rise to a complex discrimination claim.

4. Trustees also need to be aware of their confidentiality obligations

Confidentiality is of absolute importance in relation to a trans employee or member's gender identity. Some trans people may be willing to share their trans status, but for others, their gender assigned at birth is a part of their past, which is not appropriate for others to share more widely.

Under Section 22 of the Gender Recognition Act 2004 it is a criminal offence to disclose someone's past gender status if they hold a gender recognition certificate. This is a rare example of a criminal offence applying in an employment context. There are a number of possible defences to an allegation that Section 22 has been breached, but care should be taken by employers and trustees to ensure that they do not fall foul of this provision.

In addition, a trans employee or member's gender history should remain confidential even if they do not hold a GRC (unless they consent for that information to be shared), to avoid allegations of unlawful discrimination under the Equality Act 2010. Any steps taken to establish the appropriate pension' benefits for a transgender member should always bear this in mind and appropriate measures taken to protect the individual's identity and maintain confidentiality.


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