Member not entitled to early payment of deferred benefits following TUPE transfer

In the case of McKavney v Serco Group Plc, the High Court dismissed a member’s appeal from a decision of the Deputy Pensions Ombudsman (DPO).  The judge agreed with the DPO that the member’s transfer to a new employer under TUPE did not trigger early retirement rights payable on redundancy or compulsory retirement due to a reorganisation.

The member enjoyed protected status under regulations which protected the pension rights of employees in the electricity industry at the time of privatisation.  The member was originally employed by employer M.  In 2005 his employment transferred to employer S under TUPE and the member elected to transfer his past service pension benefits into employer S’s scheme. In 2012 the member’s employment transferred under TUPE to a subsidiary of employer S which was then acquired by employer A.  The member joined employer A’s pension scheme for future service but left his past service rights as deferred benefits in employer S’s scheme.

In 2015 the member was made redundant.  He received an immediate unreduced pension from employer A’s scheme, but the trustees of employer S’s scheme considered that he was not entitled to early payment of his deferred benefits from that scheme.  The member argued that he was entitled to early retirement benefits, under scheme rules providing for early retirement benefits where a member had been “compulsorily retired from Service by his Employer” due to reorganisation or redundancy.

The judge agreed with the DPO that the 2012 TUPE transfer of the member’s employment from employer S to its subsidiary did not amount to “[compulsory retirement] from Service” within the meaning of the scheme rules, as TUPE meant that the member’s contract continued without cessation. Nor did it amount to redundancy within the technical meaning of the Employment Rights Act 1996.  Nor did what had happened amount to a “reorganisation of the employer’s business” within the meaning contemplated by the scheme rule, which contemplated dismissal caused by changes in job specification rather than a TUPE transfer.

Our thoughts

This case only considers whether enhanced early retirement benefits were payable under employer S’s scheme (of which he was a deferred members).  It confirms that a TUPE transfer will not trigger an enhanced early retirement pension on the grounds of redundancy or reorganisation because of the continuity of employment that TUPE provides.  It does not consider what benefits must be provided in respect of past service by the employer making the employee redundant.