UK examines pensions transfer rights issue

UK – The government has issued a consultation paper on reform of the Transfer of Undertakings (Protection of Employment) regulations act of 1981 (TUPE), which considers the treatment of occupational pension fund transfers.

The consultation period runs until December this year, with the government anticipating that reforms will take place next summer.

Occupational pension rights do not transfer automatically under the terms of the current regulations, which seek to protect employees on the transfer of an undertaking by obliging the purchaser to assume all the employment rights from the old employer.

The government set out proposals in 1998 to reform TUPE and how best to incorporate occupational pension schemes.

The proposals include :

• requiring the purchaser to offer an occupational scheme of the same defined benefit (DB) or defined contribution (DC) type as the employee had at their previous job;

• requiring the purchaser to offer an alternative scheme, if the scheme is not the same type;

• giving the purchaser complete freedom as long as the scheme meets the required benchmark;

• requiring the purchaser to offer a scheme with benefits of similar value.

But the proposals are not without drawbacks since the requirement for purchasers to provide a scheme with a minimum level of benefits could be costly if the new employer already has a scheme in place.

The question about pension rights on redundancy is also raised, since some occupational schemes allow for enhanced pensions if employees are made redundant after a certain age. Though the government has said it would like the redundancy question to form part of the TUPE reforms, it doesn’t quite clarify how it can be effectively incorporated.

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