Your job and the law

Unions have finally scored a partial victory in persuading the government to close, in part, the loophole in protecting pension benefits when employees transfer from one employer to another under the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE).

TUPE protects the terms and conditions of transferring employees, but excludes conditions relating to old age, invalidity or survivor’s benefits provided under an occupational pension scheme.

The implementation of the Cabinet Office Statement of Practice relating to staff transfers in the public sector, published in 2000, provides protection for employees transferring from local authorities and NHS Trusts. These employees have the right to be provided with the same or broadly comparable pension schemes by their new employer.

But it is different for employees at housing associations, where unless there are contractual terms that provide otherwise, the new employer can choose what, if any, pension benefits to provide. Under the new Pensions Act 2004 all staff will get greater protection in respect of their pensions.

Under the regulations, to be implemented in April 2005, new employers of private sector staff (including housing associations) must match employee contributions up to 6% of pensionable pay into a money purchase or a stakeholder scheme. The employer can continue, if it chooses, to provide a final salary scheme, but unless the employees have transferred from the public sector (where the principles set out in the Cabinet Office Statement of Practice still apply) there is no obligation on it to do so.

Employees transferring from the public sector remain better protected, but those in private sector organisations can at least take comfort from the fact that if they are in an occupational scheme, their new employer will have to provide minimum pension benefits following the transfer of their employment.