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Early retirement benefits
[ch 12: page 437]Unlike pensions, early retirement provisions and pension enhancements contingent on dismissal before retirement age do transfer. This is because they are not “old-age, invalidity or survivors’ benefits” within the meaning of the Acquired Rights Directive. This was confirmed in a landmark European case brought by UNISON concerning rights for over-50s:
An NHS scheme entitled redundant employees aged over 50 to 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 must be narrowly interpreted. Instead, these contract terms transfer to the new employer.
Beckmann v Dynamco Whicheloe Macfarlane C-164/00 [2002] All ER(D)05
The Beckmann case was followed in Martin and others v South Bank University Case C-4/01 [2004] IRLR 74. These rulings apply to pensions in both the public and the private sector. This was confirmed in the case of Proctor & Gamble Limited v SCA [2012] EWHC 1257, which involved a transfer between two private sector employers:
Procter & Gamble (P&G) operated a defined benefit scheme which provided benefits for active members who opted to retire from age 55, subject to employer consent. The high court judge confirmed that liability for these early retirement benefits transferred to the new business owner even though their payment was discretionary (i.e. depended on employer consent). What transferred to the new owner was the contractual right for transferring employees to be treated fairly in exercising their entitlement to be considered for early retirement benefits.
However, the high court also ruled that the new business owner was only obliged to pay the benefits that were triggered by “early retirement” rights up to an employee’s normal retirement date. Pension obligations after the normal retirement date did not transfer. In addition, only the right to the “enhancement” transferred. In other words, employees are not entitled to claim a double pension, from both the seller’s pension scheme and the buyer’s scheme.
Procter & Gamble Limited v SCA [2012] EWHC 1257