The legislation governing transfers of employment originally attempted to exclude pension rights from the scope of a transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). Regulation 10 of TUPE states that the general employment protection provided on a TUPE transfer does not apply to “so much of a contract of employment or a collective agreement as relates to an occupational pension scheme”. The regulation states that rights that do not relate to “old age, invalidity or survivors’ benefits” are not treated as part of that scheme. So far, so simple – the pension scheme stay with the transferor. But then the European Court of Justice decisions of Beckmann and Martin came along.

These cases held that rights payable before normal retirement age (namely, pension rights arising on early retirement or redundancy) were not “old age, invalidity or survivors’ benefits” (because these rights were payable before old age) and therefore did transfer under TUPE. The result appears counterintuitive: the liability to pay a funded pension promise can transfer to the new owner of a business, who may not themselves have a pension scheme from which to meet these costs. Let’s take the example of a transferred employee who has a claim for early payment of a pension turned down from the transferor (eg because early payment was subject to employer agreement). In those circumstances, it would be possible for the employee to bring a claim against the transferee on the basis that the early retirement right had also transferred with their employment under TUPE.

Read full news here: CIPD