Updated: April 16, 2024
TUPE Transfer Pensions
Transfer of Undertakings (Protection of Employment) are a set of rules designed to protect your pension rights - find out all about them in this guide.
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TUPE, or Transfer of Undertakings (Protection of Employment), is a set of rules designed to protect your rights if the business that employs you goes through a transfer of ownership.
It typically comes into play when a company is taken over by, or merges with, another company, but there are other cases where it might also apply.
The TUPE transfer pensions topic can be complicated, but the expert advisors we work with have strong experience in helping customers through the process.
To help you get to grips with TUPE and what it means for your pension, this article provides a comprehensive rundown of the essential TUPE pension transfer issues, covering the following topics:
The following topics are covered below...
What is TUPE and how does it apply to pensions?
TUPE: Transferring occupational pensions and personal pensions
TUPE transfer pension obligations for private and public sector schemes
Bulk TUPE pension transfer rights
Auto-enrolment obligations for transferring employees
How do I do a TUPE pension transfer?
In all cases, you’d be advised to make an enquiry for expert advice. Indeed, the government urges pension members to seek qualified guidance if they’re unhappy with, or uncertain about, aspects of their TUPE transfer pension rights.
What is TUPE and how does it apply to pensions?
TUPE is intended to safeguard employees’ rights, most commonly in the event of a full or partial change of ownership, merger or buyout. It prevents staff from losing benefits they have built up over a period of time working for the company undergoing that change.
For example, if you’ve worked for a company for long enough to accrue a certain amount of leave, redundancy pay and other benefits, you won’t have to start again from zero when the transfer of ownership takes place: instead they’ll be carried across. The same logic applies to any benefits you’ve built up in a workplace pension.
These rights may also transfer to employees who are contracted to join that organization or who are in a waiting period.
What is a TUPE pension transfer?
Under TUPE, you should be able to keep most of the benefits that you’ve built up in your workplace pension when a new employer (usually the incoming business in a merger or acquisition) takes over as the scheme owner.
However, there are some exceptions, which we cover later.
The process for transferring, as well as exactly what you’re entitled to, will depend on the type of pension scheme you enrolled in with the original employer (e.g. personal pension or occupational pension), and on whether you work in the private or public sector.
Personal pensions have the highest level of protection under TUPE.
Employers are obliged to enrol affected staff on a scheme that is basically identical to their original pension (either with the same provider or with another that offers the same benefits), and to make an equal contribution to it.
Enhanced features, such as death benefits, are also retained.
Occupational pensions are still protected and you won’t lose access to the funds in your plan, but you don’t have an automatic right to keep certain benefits.
Your ‘new’ employer also doesn’t have to match your original employer’s contributions, but they must provide up to 6% of your own contributions if not.
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TUPE: Transferring occupational pensions and personal pensions
Occupational pensions – Occupational pensions are protected by trusts, with the employee’s funds separated from the employer’s own assets. These type of pensions could be defined benefits, where employers pay you a set income according to your years of service and salary. They could also be defined contributions, where both you and your employer contribute to your account. Alternatively, they could be a hybrid of both.
Personal pensions – Personal pensions are controlled by a third party, usually insurance providers, and always certified under the Financial Conduct Authority (FCA). Such schemes typically consist of defined contributions.
Examples: a group pension plan or a stakeholder pension scheme.
TUPE transfer pension obligations: Occupational pensions
These are the rules:
- You’re not obligated to transfer the employee’s previous pension rights of “old age, invalidity and survivor benefits”, as explained in the ‘Beckman’ section below
- Even with no suitable scheme in place, you still have to transfer the pension rights (then work on that scheme later)
- You need to replace the previous pension plan with an occupational pension plan or with a stakeholder scheme
- When it comes to transferring defined benefits, your replacement plan must meet minimal quality criteria
- Workers have a say in whether they accept your TUPE transfer pensions plan
- When it comes to matching the previous employer’s contributions, you have one of two choices: (a) Providing up to 6% of the employee’s contributions, or (b) paying the worker the same as the former employer
- While lump-sum death benefits provided under the employee’s previous plan don’t transfer, lump-sum benefits provided under another plan may
Occupational Pension benefits that transfer under TUPE: “Beckmann rights”
Counterintuitively, and as decided by the two European Court of Justice (ECJ) cases of Beckmann and Martin, you’re not obligated to transfer the rights of old age, invalidity and survivors to the new scheme. (This is also known as the “pensions exemption”).
When it comes to occupational pensions, the minimal rights that you’re obligated to transfer under TUPE are:
- Enhanced redundancy benefits – Contractual terms on redundancy (e.g. rights to early retirement pensions)
- Early retirement benefits – When the employee reaches a certain age or when he’s dismissed from service.
There are also details on how much you and the transferee contribute, among other factors.
TUPE transfer rules under occupational pensions are particularly complex, so save yourself a heap of time and hassle by making an enquiry for advice from one of the expert advisors we work with.
TUPE transfer pension obligations: Personal pensions
These are the rules:
- You’re obligated to replicate the existing pension benefits
- There are no pension exemptions (as with occupational pensions)
- Your pension plan must be the same as the former employer’s plan
- Your contribution rate has to match the former employer’s contribution rate
- You can offer a different pension scheme to the previous employer’s contribution rates and the charges for administering your pensions are the same
- You retain all previous pension rights, like those on redundancy, and you provide those rights even if you don’t have a suitable pension plan in place
- Both lump sum death benefits on that previous pension plan, as well as lump sum death benefits on other plans transfer to your pension scheme
TUPE personal pension rights on transferring employment have their own hurdles. Call us on 0808 189 0463 or make an enquiry for a no obligation chat with one of the expert advisors we work with.
TUPE transfer pension obligations for private and public sector schemes
There are different TUPE pension transferring rules for the private and public sector. Each has its own provisions.
The private sector is where you work for any private business regardless of type or size.
That business could be under one employer, or it could be a Walmart.
The new employer doesn’t have to match the scheme of the old, but they do have to give you the same kind of benefits.
Schemes provided by the private sector typify:
- Defined contribution scheme where both you and your employer contribute to your account.
- Personal or stakeholder pension. Defined contribution pensions controlled by a third party. Stakeholder pensions are for low-paid workers with fees starting at £20 per month, which members can operate at their will. (They’re similar to capped drawdown pensions. See our capped drawdown pension guide for more information.
- Defined benefit scheme where employers pay you a set income according to your years of service and salary.
We discussed how to transfer TUPE pensions in the private sector in the previous section on transferring occupational and personal pensions.
For other pension issues on a TUPE transfer, get in touch for more specific personalised advice.
The public sector is where you work for the government, say for NHS, the police force, education and so forth. The government gives you its own pension plans.
When it comes to TUPE transfers, the rules vary depending on whether you work for central or local government. In both sectors, TUPE pension transfer laws are far more protective than they are in the private sector.
When it comes to local government (where you get the Local Government Pension Scheme (LGPS), terms vary depending on whom you currently work for and where your contract is being transferred to:
- If you’re transferring from one local authority to another (even in a different position), your terms remain unchanged.
- If you’re transferring to a private contractor, that contractor can choose whether to continue the LGPS rights, or to transfer your TUPE pension transfer rights to a similar plan. In the first case, the LGPS continues to control your plan. In the second case, your new employer manages the scheme under his own jurisdiction.
The government adds a layer of protection insisting that employees who work for the public and who are transferring their pension rights get “best value” benefits and all the benefits of their previous scheme.
Bulk TUPE pension transfer rights
Mostly offered for employees of central and local government jobs (and sometimes by large companies), the bulk TUPE pension transfer is a special arrangement where employers are separately allowed to negotiate transfer items between their old pension scheme and the new one.
This helps them receive pension rights of an equivalent – or even an enhanced value – to that of their previous scheme.
Members are typically given up to three months to decide whether or not they want to participate in this bulk transfer arrangement. The process is carried out by the Government Actuary’s Department (GAD).
See our guide on GAD income drawdown for more information.
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Auto-enrolment obligations for transferring employees
As with all jobs, employers have to automatically enrol new employees in a pension plan by a certain date.
If this staging day has already passed, you must follow through on your pension obligations to your new workers the day following, or as close as possible to the automatic enrolment date.
How do I do a TUPE pension transfer?
Follow these steps…
- Identify the transferring employees and the rights they received under their previous pension scheme
- See whether the scheme is an occupational pension scheme or a personal pension scheme.
- Identify which arrangements transfer to them through TUPE, using the Beckman rights as guidance
- With public sector pensions, refer to the Fair Deal guidance terms
- Consider any contractual obligations. Namely, do you have any obligation to pay one or more workers certain benefits
- Work out the minimum pension benefits you’re required to provide
- Consider your auto-enrolment obligations for transferring employees
- Consider your bulk transfer obligations, if applicable
- Implement the TUPE transfer of pension rights scheme
- Put previous employees into your new qualifying pension plan
- Inform employees that they’re in a qualifying TUPE pension plan
- When it comes to those who are contracted and waiting in line, assess them for pensions automatic enrolment as you would with new employees
For problematic or additional pension issues on a TUPE transfer, get in touch and we’ll connect you to one of the independent pension advisors we work with.
When does TUPE pension transfer apply?
Consider the following circumstances:
- You’re replacing a previous employer
- Your company merges with another company. You’re now the brand new employer responsible for pension plans
- You contribute to the pension plans to employees who outsource overseas
- You’re a new contractor who takes over the responsibilities from a previous contractor (known as re-tendering)
Speak to a TUPE pensions transfer expert
Call us today on 0808 189 0463 or make an enquiry for a free, no-obligation chat.
We’ll introduce you to one of the independent financial advisors we work with, ensuring that they have wide experience advising customers on TUPE pensions transfer rights.
Ask a quick question
We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.
Richard Angliss
Finance Expert
About the author
Richard Angliss has made a career in financial services which stretches over 40 years.
His early career was spent learning about the various financial products and applying them to prudent advice, working for one of the largest life assurance and investment firms. After that he joined the financial services arm of a very well-known firm providing independent advice to their 8 million customers.
For the last 20 years he has been involved in building software solutions that help Advisers and clients work together to achieve good financial outcomes and helping to set up three independent advisory firms. He also has written many articles for financial services publications and provided commentary for newspaper journalists.
At an early stage in his career he realised the great satisfaction that comes with being able to help people achieve their goals and protect their families. “Regulation of financial services has hugely impacted on ensuring people get appropriate advice. The issue these days is access to that advice and just as importantly regular reviews to make sure that everything stays on track”.
With the growing development of online resources such as Online Money Advisor he sees a great future for people to access advice to make their pension and investment work harder for them. Plus, of course, to ensure they have insurance products in place that will be required when unforeseen events happen.
He knows getting that balance right is crucial to prudent financial planning and the wellbeing of individuals and their families.
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