Tupe or not tupe? That is still the question
TUPE is another one of those annoying pseudo-words (like SERPS and FSAVCS) that pensions people use when speaking in the coded gibberish they imagine makes them sound more than a little on the clever side. It certainly does single them out from the crowd, though not in the way they think. TUPE is shorthand for a piece of employment legislation with the snappy title of the Transfer of Undertakings (Protection of Employment) Regulations 1981 [SI 1981 No 1794]) no less, and has to do with companies being taken over by other companies. The idea of these regulations (which have nothing to do with pensions, by the way) is that they are designed to safeguard the rights of employees when the company they work for gets taken over. Not an unusual occurrence these days.
So, for example, where someone works for company A and that gets taken over by company B, the guys who own company B have to ensure that the employees they take on are given continuity of employment rights under the TUPE rules. The thing is, these TUPE rules don’t apply to occupational pension rights. So, as a result of a transfer of employment, people can find their future pension rights are reduced, possibly with the loss of all contributions from the new employer.
Now, this is something that has ‘been in the air’ for some time and all sorts of practices have arisen. For instance, where employment switches from the public sector to the private sector, pension rights are protected. But in other instances they are not. Sometimes private companies that take over other private companies extend equivalent pension rights to their new employees, but sometimes they don’t. It depends. It is this inconsistency that the pensions green paper highlighted and that these new proposals are looking to put right. It’s a level playing field thing. Well, level-ish, as it turns out.
What they’ve come up with is this. The Government is now saying its aim is that employees who already have pension contributions being made for them by their employer, won’t be able to have them taken away from them if their company is taken over or their employment is transferred to another employer. Well, not completely anyway. The proposal is that the new employer will be required to make matching contributions up to 6% of salary into a Stakeholder pension scheme for such employees in future.
What the latest paper doesn’t say is whether or not employers will be allowed to reduce, or even stop their contributions as time goes on, but it does mean that employers will no longer be able to completely ignore pensions on business acquisition. Once again, we await with interest the exact rules and regulations that will come out of this, along with all the details we still need to know about practically every aspect of pensions right now. Roll on Penny-Dropping Day!
26 June 2003
This document is based on Scottish Life’s understanding of the current law and practice and the proposals included in the DWP paper “Simplicity, security and choice: Working and saving for retirement - Action on occupational pensions” issued on 11 June 2003. These are proposals and may change in the future.