The Employment Appeal Tribunal (EAT) in London has ruled that pension schemes can discriminate against same-sex couples.

It’s reversed a previous decision requiring pension contributions between heterosexual married couples and those in civil partnerships to be the same.

EAT was presiding over the case of a former cavalry officer, John Walker, who took chemical firm Innospec to court after a 23-year career with the company.

The dispute arose after it reportedly refused to pay his civil partner the equivalent of a full widower’s pension in the event of his death.

The case hinged around whether UK law contravened European law by allowing employers and pension scheme trustees to restrict the amount of benefits payable on the death of a member in a civil partnership.

In November 2012, the Employment Appeal Tribunal had ruled that the ‘backstop’ was unlawful, with the decision seen as an important step forward for gay rights.

However, in a ruling published this week, EAT said it had been wrong to think that the backstop breached European law.

The Equality Act 2010 contains a loophole allowing for private occupational pension schemes to ignore years of contributions by gay employees and limit survivor benefits for civil partners.

A succession of MPs and peers from all sides of the political divide pressed the case for the Marriage (Same Sex Couples) Act for England and Wales to close the loophole ahead of Royal Assent last year.

But the government resisted the demand and the Department for Work and Pensions (DWP) warned that the cost of equalising pensions would be £18 million.

DWP subsequently announced a review of the imbalance. It will report later this year.

Simon Tyler, a pensions lawyer at international law firm Pinsent Masons said: “This ruling may come as a relief to businesses who may have been concerned about an increase in pension scheme liabilities. However, it will also be seen as a blow to the rights of civil partners who do not have the same rights to death benefits under a pension scheme as married couples.

“The government has agreed to complete a review of the law by 1 July 2014. Even if the Employment Appeal Tribunal’s decision isn’t appealed, the government could change its stance as a result of that review, so this matter may yet rumble on for some time – especially since the government plans to treat same-sex marriages in the same way as civil partnerships, rather than opposite sex marriages.”