TUPE, the Transfer of Undertakings (Protection of Employment) Regulations 2006, provide that pension liabilities do not transfer upon the transfer of a business or undertaking. Or do they?
Regulation 10(2) stipulates that occupational pension scheme provisions transfer unless they are ‘benefits for old age, invalidity or survivors’. Early retirement benefits are outside this definition and transfer, irrespective of the parties’ intentions: Beckman v Dynamco Limited  ICR 50; Martin v South Bank University  1 CMLR 472.
Transferee companies need to know they are assuming liabilities for early retirement pensions; and factor this cost into the purchase price.
In  EWHC 1257 (Ch.) the parties’ actuaries disagreed over the value of this liability. The difference was £19m. The High Court (Hildyard J) decided that:
- even where early retirement benefits are discretionary, they come within the ‘rights and obligations’ transferring under TUPE
- the new employer has a duty to consider applications for early retirement benefits in good faith
- the new employer’s liability to fund early retirement benefits lasts only until normal retirement date, after which the transferor’s pension scheme takes over
The law is now clear. The practical implications are not. If you would like to discuss these issues, please contact me.