Mondaq Business Briefing -Herbert SmithUnited Kingdom - TUPE Applies to Early Retirement Pensions on Dismissal.

(From Mondaq.com)

The ECJ recently held in Beckmann v Dynamco that employees' rights to early retirement pensions on dismissal will survive a business transfer to which the Transfer of Undertakings (Protection of Employment) Regulations 1981 applies. Although the scope of the case, particularly in the private sector, remains subject to debate, (and may only be clarified by a further judicial determination), it is clear that the purchaser of a business could now be liable to provide early retirement benefits equivalent to those provided under the seller's scheme as if the business transfer never occurred.

Where a business is sold and the Transfer of Undertakings Regulations (the TUPE Regulations) apply, the terms and conditions of employment of the transferring employees are transferred automatically to the purchaser. The TUPE Regulations, however, exclude "old-age, invalidity or survivors'" benefits under an occupational pension scheme from being automatically transferred, and it has always been assumed that this exemption covered all pension benefits under an occupational pension scheme.

In the Beckmann case, the ECJ considered whether early retirement pensions payable on redundancy constituted "old-age benefits" under the NHS Superannuation Scheme. Under a collective agreement for employees working within the NHS, employees over 50 with five years' NHS service who were dismissed for redundancy were entitled (together with other compensation) to immediate payment of an enhanced early retirement pension. Mrs Beckmann had worked within the NHS and had contributed to the NHS Superannuation Scheme until the body for which she worked was transferred, as part of a TUPE transfer, to Dynamco. She was later dismissed by Dynamco for redundancy. On her redundancy Dynamco paid her the lump sum compensation calculated in accordance with the collective agreement, but no early retirement pension was paid. Mrs Beckmann brought legal proceedings seeking a declaration that she was entitled to those benefits and an order that Dynamco pay them. The ECJ held that only those benefits at the end of an employees' normal working life as laid down by the general structure of the pension scheme in question constituted old-age benefits.

The ECJ stated that "early retirement benefits and benefits intended to enhance the conditions of such retirement, paid in the event of dismissal to employees who have reached a certain age... are not old-age, invalidity or survivors' benefits".

A potential liability therefore now arises where employees are entitled to an early retirement pension on dismissal under the seller's pension scheme and those benefits are not replicated in a purchaser's scheme following a TUPE transfer. The potential liability to the purchaser where there are Beckmann liabilities is likely to amount to the cost of topping up benefits to the amount that the transferring employee would have received had he remained a member of the seller's scheme to the date of dismissal, and this will have different implications, ...