This could delay any move to press the UK government to change the law to eliminate or reduce the differences in survivors' benefits, said pensions expert Alastair Meeks of Pinsent Masons, the law firm behind Out-Law.com.
Last year the EAT ruled that a surviving civil partner's entitlement can be restricted to rights the scheme member built up from 5 December 2005, the date that civil partnerships were introduced.
Generally, the law treats civil partnerships in the same way as opposite sex marriages. However, the 2010 Equality Act, reflecting the earlier law introduced at the time when civil partnerships were established, allows pension scheme trustees to take account only of benefits built up from 5 December 2005 in calculating pensions payable on the death of a member in a civil partnership.
The Court of Appeal cited two principles of EU law in its decision:
First, EU legislation does not have retroactive effect "unless, exceptionally, it is clear from its terms or general scheme that the legislator intended such an effect, that the purpose to be achieved so requires and that the legitimate expectations of those concerned are duly respected", the Court of Appeal said.
Second, changed legislation applies to the "future effects of a situation which arose under the law as it stood before amendment", unless it specifically states otherwise, the court said.
John Walker, a member of an occupational pension scheme run by his former employer Innospec, had been receiving a pension from the scheme since his retirement in 2003.
Walker had been living with his male partner before retirement and the two entered into a civil partnership in January 2006. Because his service with the company occurred before the law changed, the EAT said that the most his partner could receive if he survived Walker was around £500 a year.
Had Walker been married his wife would have been entitled to a pension worth two thirds of his annual benefits if she had survived him.
Walker had claimed unlawful discrimination on the grounds of his sexual orientation, and an employment tribunal initially ruled that, although the scheme rules were permitted under the Equality Act, the Act itself was incompatible with EU law. However, that ruling was overturned by the EAT, a decision which Walker then appealed to the Court of Appeal.
"It does not seem to me that the pension trustees can be required to confer on Mr Walker a benefit to which he is not entitled. Mr Walker’s entitlement to benefit was part of his pay that was earned incrementally during his period of service. At the time when he earned that entitlement the discriminatory treatment of which he complains was lawful," Lord Justice Lewison said in the judgment.
Conduct which was lawful when it occurred cannot retroactively become unlawful, Lewison said.
"After the EAT decision in 2014, the government carried out a review of same sex survivors' benefits but failed to take steps in response: it merely pledged to consider the findings 'very carefully'," Meeks said.
"While the secretary of state has the power to change the law for the purpose of eliminating or reducing the differences in survivors' benefits, the outcome of the this appeal may deter the government from taking any action now," he said.
"The original Employment Appeals Tribunal (EAT) decision was controversial, and many pension schemes had voluntarily chosen to treat civil partnerships in exactly the same way as opposite sex marriages. However, the cost to schemes of providing fully equalised benefits could be substantial – government estimates in excess of £3 billion between private and public sector pension schemes have been reported, and there are concerns that these figures may be underestimated," Meeks said.
Meeks said that making retrospective changes to pension schemes is always fraught with difficulty, with many points to consider such as the impact of the extra cost on scheme funding or what to do about individuals who have paid additional contributions to purchase extra survivors' benefits.
The Court of Appeal admitted that Walker would find its conclusion hard to accept, but reasoned that "changes in social attitudes, and the legislation which embodies those changes, cannot fully undo the effects of the past."
Schemes that do not provide fully equalised benefits to civil partners "are looking increasingly out-of-touch," Meeks said. "But there is inevitably a financial burden where schemes are asked to respond to changing social mores; who will foot the bill?"
Pensions litigation expert Isabel Nurse-Marsh, also of Pinsent Masons, said: "Many lawyers will not be surprised at the outcome of this appeal. It shows that the courts are unwilling to intervene and challenge the legality of exemptions to European discrimination law. The EAT felt that the UK law was clear in allowing schemes not to equalise survivors' benefits fully, and to ignore this would be to 'legislate rather than interpret'. The Court of Appeal evidently agrees."