TUPE and Pensions

The Acquired Rights Directive was adopted in 1977 and implemented in UK law by the Transfer of Undertakings (Protection of Employment) Regulations 1981, SI 1981/1794. These regulations were later revoked and replaced by the Transfer of Undertakings (Protection of Employment) Regulations 2006 SI No.246 (TUPE). The purpose of the Directive was to “safeguard employees' rights in the event of transfers of undertakings, businesses or parts of businesses”. The directive was amended in 1998 to give Member States the option of extending the protection to include occupational pensions. The Labour Government’s June 2003 Pensions White Paper proposed that transferee companies should be obliged to match employee contributions to a stakeholder pension scheme up to a level of 6% or offer an equivalent alternative. The Pensions Act 2004 and the Transfer of Employment (Pension Protection) Regulations 2005 contained the necessary legislation, with the provisions coming into effect in April 2005.

A greater degree of protection is afforded to staff compulsorily transferred from the public sector. Under “Fair Deal”, a non-statutory policy introduced in 1999, the new employer is required to ensure that there is “broadly comparable” pension provision for future service and that there are options for the handling of existing accrued benefits. In the case of transfers from local authorities, the requirements were given a legislative underpin. As part of its reform of public service pensions, the Government said it would retain fair deal. However, instead of requiring new employers to provide “broadly comparable” pension arrangements, it would allow compulsorily transferred staff to retain membership of the public service pension scheme. This proposal was welcomed by trade unions. In November 2012, the Government launched a consultation on how the reformed Fair Deal policy should apply to staff that have been compulsorily transferred out of the public sector under the old Fair Deal. In its response to this consultation in October 2013, the Government said that when existing contracts are retendered, there will be a presumption that staff covered by the fair deal policy should be offered access to a public service scheme.