Craig Blackwood looks at the TUPE implications of a recent Ombudsman determination

Since the Beckmann and Beckmann cases were decided by the European Court of Justice (ECJ), there has been much confusion about the scope of the pensions exception in the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). A recent Pensions Ombudsman determination considered a case where a member claimed that his right to an unreduced early retirement pension was protected by TUPE.

Background
Mr Duffy was employed by ICI and in 1995 transferred under the 1981 TUPE Regulations to Union Carbide Limited (UCL) and became a member of a new ICI section of the UCL pension scheme. Under the rules of this section, certain members could take an unreduced early retirement pension on redundancy.

Following an acquisition in 2003, the trustees of the UCL scheme agreed to a package of benefits changes proposed by UCL and the new owner of UCL, Dow Chemical Company Limited (Dow). One of the changes was the removal of the right to an unreduced pension on redundancy. The trustees wrote to members notifying them of the proposed changes, but did not specifically refer to the redundancy pension.

In 2009, Mr Duffy was given notice that he would be made redundant. When he realised that he would not receive the unreduced early retirement pension he thought he was entitled to, he complained to the trustees that the rule amendment was not valid. Dow was of the view that the amendment was valid, but even so it executed a deed of amendment in 2009 to make the changes again from 2009.

Complaint and determination
Mr Duffy's complaint to the Ombudsman was that his pension accrued pre-2003 was reduced for early payment. He claimed that TUPE protection applied to the 1995 transfer, and therefore his right to an unreduced early retirement pension on redundancy could not be removed. Mr Duffy asserted that the rules had not been validly amended in 2003, and that the purported amendment had not been communicated clearly to the members.

The complaint in relation to TUPE protection relates to the scope of the pensions exception under the TUPE regulations, which provide that protection does not apply to any provisions of the pension scheme which do not relate to "benefits for old age, invalidity or survivors". The conclusion reached in Beckmann and Martin was that certain types of benefit, such as an unreduced early retirement pension on redundancy, may be capable of TUPE protection, and that therefore the right to such a benefit may be capable of "transferring" from one employer to another. The full scope of this is still not fully understood.

The Ombudsman addressed the issue of TUPE protection, but unfortunately did not explore it in any detail. The Ombudsman appeared to acknowledge that Mr Duffy enjoyed protection under TUPE. It was decided that neither TUPE nor the ECJ cases precluded amendments to scheme rules where this was permitted under the legislation of the member state.

The Ombudsman considered that the amendments made in 2003 were permitted both by UK legislation and under the terms of the UCL scheme's amendment power.

The Ombudsman decided that the 2003 amendment was valid, but he found that the 2009 amendment would have removed the benefit anyway. Mr Duffy claimed that his entitlement arose when he was given notice of redundancy in 2009, however the Ombudsman stated that the entitlement to a pension of any sort arises on leaving service, not before. The Ombudsman did however find that the trustees had failed to notify members specifically of the removal of the unreduced early retirement pension
in 2003 as required under the Disclosure Regulations, and this
was maladministration.

Conclusions and comments
Unfortunately, this determination did not explore at length the nature of the TUPE pensions exception and the extent to which an early retirement pension on redundancy might be capable of transferring, and it is likely that a court decision would be needed for a more detailed analysis. However, the Ombudsman's conclusion that Beckmann rights can be removed by a valid subsequent rule amendment will be of interest to employers who find themselves in a similar position to Dow. This case is also a reminder for trustees to consider what action to take under the Disclosure Regulations following a rule amendment.

Craig Blackwood is a solicitor at DLA Piper UK

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