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Do staff pensions transfer under TUPE?

The Transfer of Undertakings (Protection of Employment) Regulations, or TUPE, is a complex set of regulations that are designed to protect employees’ rights when their contracts transfer to a new employer.

This could occur when a business is sold as a going concern out of administration, for example, or perhaps as part of the pre packaged administration insolvency procedure. TUPE regulations are complicated and wide-ranging, and the transfer of pensions in these circumstances can introduce further complexities that are of particular concern for the transferee, or new employer.

Controlling the level of financial liability and legal obligations taken on under a TUPE transfer is a key issue for transferee businesses, so what needs to be taken into consideration when thinking about the potential transfer of staff pensions under TUPE?

Pension rights under TUPE

Two aspects for consideration apply to the pension rights that have already been built up by the transferring employees and their future rights with the new employer. The type of pension scheme run by the old business indicates whether pension rights might transfer, but there are further issues to bear in mind.

There are non-standard pension rights, known as ‘Beckmann rights,’ that can result in unexpected liability for the new business. Additionally, it may be incumbent on the transferee business to provide a minimum level of pension provision for transferring members of staff.

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What type of pension scheme did the old company run?

Most pension rights under occupational pension schemes are excluded from TUPE but those under a personal pension scheme do transfer. This is why it’s vital for the transferee business to establish the type of pension scheme originally in operation.

If they inherit a personal pension scheme the new business may need to continue the level of contributions made by the former employer. This could be far higher than anticipated, and a potentially significant and unwelcome long-term liability.

Rights under an occupational pension scheme that don’t relate to old age, invalidity, or survivors’ benefits – those associated with early retirement, for example, - known as ‘Beckmann rights,’ may transfer under TUPE regulations when other pension rights do not.

What are a transferee’s pension obligations after a TUPE transfer?

Transferee businesses are not obliged to mirror the workplace pension arrangements set up at the old business but they may need to provide a minimum level of pension provision for the staff transferring.

Where occupational pension schemes are concerned, transferring staff who were members of such a scheme or were eligible to become members prior to the transfer, the minimum level could require the new business to establish a new occupational pension scheme with an obligation to match employee contributions up to a pre-determined level.

As you can see, the transfer of staff pensions under TUPE is an extremely complex area of business. If you require further information tailored to your situation which includes staff redundancy, our experts at Redundancy Claims UK can help. We are specialists in this area and will ensure you understand your rights and obligations under TUPE regulations.

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