Pensions on business transfers

The government has this week issued a consultation paper proposing amendments to the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE). TUPE provides protection for employees' terms and conditions of employment when businesses change ownership. Currently, rights under occupational pension schemes are excluded from this protection.

The consultation paper seeks views on, amongst other things, amending TUPE to provide for protection of such pension rights. However, the government have said that in making any such change, they would aim to strike a balance between protecting pension rights and imposing additional burdens on employers.

Several options are suggested for protecting pension rights, including:

1. requiring the new owner to provide an approved occupational pension scheme with no specification as to type or level of benefits (unless the scheme was contracted-out). This could be coupled with limits on any reduction that could be made to members' benefits;
2. the new owner could choose whether to provide money purchase or final salary benefits provided the scheme met a prescribed benchmark; or
3. benefits under the new owner's scheme would have to be of a similar value to those under the original owner's scheme.

Additional requirements are suggested where the original owner's scheme is contracted-out.

If any of these options were chosen, the government would propose to allow new owners to pay employees alternative compensation in exceptional circumstances.

Comments are due on the consultation paper by 15 December 2001.

For a full copy of the DTI consultation please click/copy and paste the following link: www.dti.gov.uk/er/tupe/consult.htm

For further information please contact Mark Grant on +44(0)20 7367 2325 or by e-mail at [email protected].

If you're looking for comment and legal analysis on the Pensions Ombudsman, visit www.law-now.com/po-info. po-info is the new on-line information service from CMS Cameron McKenna's specialist Ombudsman Unit, providing pensions professionals with up-to-date expert advice. For further information on po-info contact Mark Grant on +44 (0)20 7367 2325 or e-mail