THE PENSIONS ACT 2004: TUPE AND PENSIONS

April 2005 saw the introduction of a number of significant new laws intended to provide greater protection for members of occupational pension schemes, where the business in which they are employed transfers to another employer under the Transfer of Undertakings (Protection of Employment) Regulations 1981 (also known as "TUPE"). In this month’s Employment Matters, we will look at how this new legislation impacts upon such transfers.

The TUPE Pensions Exclusions

In general terms, where one party (the transferor) transfers a business or undertaking to another party (the transferee), TUPE provides that the contracts of employment of those people that work for the business being transferred automatically pass to the transferee. This means that the employees concerned automatically become employees of the transferee, on the same terms and conditions of employment, with no break in service.

The one exception to this rule is in relation to occupational pension schemes. Under TUPE, there is no obligation on the transferee to continue the provision of an occupational pension scheme that has been provided by the transferor for the benefit of its employees. (Accrued pension rights are, however, protected under existing pensions legislation.)

In the past, this has meant that employees' future pension rights have sometimes been significantly reduced as a result of TUPE transfers.

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