UK: The Transfer Of Undertakings (Protection Of Employment) Regulations And Pensions - Pensions In 30 Podcasts, Episode 28

Last Updated: 21 September 2017
Article by Ian Chapman-Curry

This podcast provides an overview of TUPE and pensions.

Download podcast

Subscribe via iTunes

Download the fact sheet here.

Key Points

  • Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) is a very complicated area of employment law. It is particularly difficult when it interacts with pension rights. Specific legal advice is advised if you are dealing with pension rights under TUPE.
  • TUPE does not generally apply to pension benefits. As a result, an employee's entitlement to pension benefits do not generally transfer under TUPE. There are, however, three key exceptions to this rule:

    • Beckmann and Martin rights - rights to certain enhanced redundancy benefits and early retirement benefits may transfer under TUPE;
    • minimum pension rights that apply in certain specific circumstances and, if they apply, provide transferring employees with limited protection by requiring the receiving employer to provide pension benefits in line with prescribed minima; and
    • personal pension schemes - an individual's contractual rights in respect of a personal pension scheme (e.g. a Group Personal Pension (also known as GPPs)) will transfer automatically.

Main Sources

TUPE

Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) applies Council Directive 77/187/EEC (the "Acquired Rights Directive") in the United Kingdom. Before 6 April 2006, the relevant legislation was found in the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE 1981).

If TUPE applies (i.e. if there is a 'relevant transfer') there will be an automatic transfer of employees and their transferable contractual terms from the existing employer (the transferor) to the new employer (the transferee).

TUPE is a very complicated area of law that is covered in detail from the employment law perspective.. The rest of this fact card focuses on the interaction between TUPE and pensions.

TUPE and pension rights

Entitlement to pension benefits under occupational pension schemes do not, as a general rule, transfer under TUPE. This is because of a specific carve out in the Acquired Rights Directive that excludes benefits for old age, invalidity or survivors from the scope of protection. This is also known as the 'pensions exemption'.

At a very high level, this means that there is no obligation for the new employer to replicate the terms of a transferring employee's membership of an occupational pension scheme.

Exceptions to the pensions exemption

There are, however, three key exceptions to the pensions exemption which are vitally important in respect of transfers under TUPE and rights to pensions.

1. Beckmann and Martin rights

Case law provides that a limited range of pension benefits are likely to transfer under TUPE. These are those benefits that the Court of Justice of the European Union (CJEU) decided are not benefits for old age, invalidity or survivors. These have become known collectively as 'Beckmann and Martin rights' after the claimants in two landmark CJEU decisions:

  • Beckmann v Dynamco Whicheloe Macfarlane Ltd; and
  • Martin v South Bank University.

In summary, these rights are:

  • enhanced redundancy benefits (e.g. rights to early retirement pensions payable on redundancy) (otherwise known as Beckmann rights); and
  • early retirement benefits that are only available on the employee's dismissal from service or when the employee reaches a certain age (otherwise known as Martin rights).

Because these rights do not fall within the pensions exemption, if there is a transfer under TUPE these rights will transfer from the transferor to the transferee. As a result, if any liabilities arise to provide enhanced redundancy benefits or early retirement benefits, the transferee will be responsible for providing those benefits.

The scope of Beckmann rights was considered and clarified in the Procter & Gamble case.

In particular, the decision in the Procter & Gamble case suggests that where the obligation to provide early retirement benefits passes to the transferee, the transferee is only liable for the cost of providing the pension between the employee's early retirement and their normal retirement date. The transferor remains 'on the hook' for the cost of providing benefits from the employee's normal retirement date.

2. Minimum pension rights under TUPE

TUPE 1981 ceased to apply with effect from 6 April 2006. For transfers on and after 6 April 2006 TUPE (i.e. the 2006 regulations) apply. Under TUPE the transferee is required to provide a minimum level of pension benefits in certain circumstances.

These circumstances are that:

  • a transfer under TUPE has taken place; and
  • under the transfer, an employee ceases to be employed by the transferor and is, instead, employed by the transferee; and
  • immediately before the transfer there is an occupational pension scheme and the employee is either:

    • an active member of the scheme; or
    • eligible to become an active member of the scheme; and
  • the occupational pension scheme was either:

    • a defined benefit scheme; or
    • a money purchase scheme where the transferor was either required to make contributions or had, in fact, made a contribution.

If these circumstances apply, the transferee is required to provide pension rights in line with ss. 257 and 258 of the Pensions Act 2004 and the Transfer of Employment (Pension Protection) Regulations 2005 (as amended with effect from 6 April 2014).

Pension protection rights

Broadly speaking, the pension protection rights that apply to transfers on and after 6 April 2014 are rights to eligibility of one the following:

  • a defined benefit scheme which satisfies the standard required to contract out of the State Second Pension; or
  • an occupational money purchase or stakeholder pension scheme which matches the employee's contributions up to a maximum of 6% of basic pay; or
  • an occupational money purchase or stakeholder pension scheme which matches the transferor employer's level of contributions.

It is useful to note that if the transferee employer intends to use a contract-based arrangement, these obligations can only be fulfilled by using a stakeholder pension scheme.

It is also important to note that there is an opt-out to these TUPE provisions - the transferee and employee can agree to any other pension terms. However, the transferee can only do this after the TUPE transfer has occurred.

3. Personal pension schemes and pension rights

Personal pension schemes (sometimes referred to as contract-based pension schemes) are not subject to the pensions exemptions. Under TUPE, an employee's contractual rights in respect of personal pension arrangements will automatically transfer to the transferee.

This means that, for example, following the transfer, the transferee has an obligation to make the same contributions to the contract based pension scheme as the transferor made.

Common examples of personal pension schemes include Group Personal Pension Plans and stakeholder pension schemes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
19 Sep 2019, Seminar, Birmingham, UK

Providing GCs, Heads of Legal and senior in-house lawyers with timely, topical and practical legal advice on a variety of topics.

26 Sep 2019, Seminar, London, UK

Providing GCs, Heads of Legal and senior in-house lawyers with timely, topical and practical legal advice on a variety of topics.

8 Oct 2019, Seminar, Birmingham, UK

Supporting the development of paralegals, trainees and lawyers of up to five years' PQE by providing valuable knowledge and guidance together with practical tips.

Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Practice Guides
by Mondaq Advice Centres
Relevancy Powered by MondaqAI
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions