To ensure readers are awake after reading the title of this blog post, a quick quiz:
Q. What do the Railways Act 1993 and the Electricity Act 1989 have in common and what do these Acts have to do with TUPE?
A. They both protect the pension rights of employees of former public sector employers after their work is outsourced to the private sector.
Normally, the Transfer of Employment (Pension Protection) Regulations 2005 only require transferees (buyers of a business or new contractors taking on a new contract or winning a contract from another provider) to offer transferring employees a DC (money purchase) pension with an employer contribution matching the employee’s contribution up to a maximum of 6%. Former British Rail and Electricity Board employees benefit from the right to keep their final salary pension post transfer or at least not be any worse off owing to the detail tucked away in the Schedules of the above legislation.
This is a nasty little TUPE trap for employers who bid for a contract on the assumption that the usual pension protection regulations apply and later find out that instead of a 6% DC pension contribution, they are forking out 20% of the employee’s pay to fund a DB (final salary) pension.