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TUPE and pensions
Any provisions relating to old age, invalidity or survivors’ benefits under an occupational pension scheme are specifically excluded from TUPE by regulation 10. They do not transfer. But note that only occupational pension rights are excluded — not personal pension schemes or group personal pension scheme obligations.
Unlike pensions, early retirement provisions do transfer. The key case is a decision of the European Court: Beckmann v Dynamco Whicheloe Macfarlane (C-164/00). The case concerned rights for over-50s. An NHS scheme provided for redundant employees aged over 50 to receive an early retirement pension. The ECJ held that early retirement benefits are not old-age, invalidity or survivors’ benefits and are therefore not covered by the pensions exclusion, which, it said, must be narrowly interpreted.
Staff at Redwood College of Health Studies were entitled to enhanced benefits and compensation on redundancy under their NHS scheme. When they transferred to a new employer, they had to move their pension, but the new scheme did not provide the same benefits when they were later made redundant. The ECJ held that the employees were entitled to the same early retirement benefits as they would have been entitled to under the NHS scheme. It said that only benefits paid when an employee reaches the end of his or her working life can be classified as old-age benefits.
Martin and others v South Bank University Case C-4/01 [2004] IRLR 74
The Beckmann principles were followed again in this 2012 case before the Court of Appeal:
In 2007, P&G sold its Family Care business to SCA. TUPE applied. There was a dispute as to whether the pensions at the manufacturing site transferred to the new owner. The P&G defined benefits scheme included provision for early retirement benefits. The Court confirmed, following Beckmann, that the early retirement benefit was not covered by the TUPE exclusion, so liability transferred to the new owner. This was the case even though the benefit was discretionary. However, the transferee was only obliged to meet the liability for the enhanced benefit until normal retirement age, and not beyond that date.
Proctor & Gamble Limited v SCA [2012] EWHC 1257
Before 6 April 2005, where a business changed ownership, there was no obligation on the new employer to provide membership of a similar pension scheme to that provided by the old employer, or even to allow transferring employees into its existing scheme, unless specified in the Sale and Purchase Agreement. The only legal obligation was that the new employer had to at least allow employees voluntary access to a designated stakeholder pension scheme. The new employer did not have to contribute any of its own money to the stakeholder pension scheme.
New laws were introduced on 6 April 2005. These new laws only apply to employers who provide employees with membership of an occupational pension scheme (i.e. money purchase, final salary or career average).
Under the Pensions Act 2004 and the Transfer of Employment (Pension Protection) Regulations 2005, if the old employer provided a pension scheme, the new employer must provide some form of pension for those who were eligible to join. It does not have to be equivalent, but it must be of a minimum standard, matching employee contributions up to a maximum of six per cent of salary. Further details can be found on the website of the Pensions Advisory Service at: www.pensionsadvisoryservice.org.uk/workplace-pension-schemes/final-salary-schemes/tupe