Changes to pension protection on a TUPE transfer take effect
from 6 April 2014. The amendments aim to bring the rules on pension
protection on a TUPE transfer into line with the rules on pension
auto-enrolment, which are coming into effect for increasing numbers
of employers.
The changes only affect contributions to defined contribution
schemes. The rules on defined benefits schemes on a TUPE transfer
remain unaltered.
Under current rules transferees are required, as a minimum, to
match employee contributions to a pension scheme up to a maximum of
6% of earnings.
As from 6 April 2014, where the transferor was affected by
auto-enrolment, the transferee's minimum obligation will
instead be to match the contribution made by the transferor to an
auto-enrolment pension. This could be as little as 1% of
earnings.
A transferee will be able to offer a higher contribution if it
wishes, but the intention is that no transferee should be obliged
to pay more than the transferring employer was obliged to pay under
the auto-enrolment regime. Without the change, transferees might
have found themselves having to improve very substantially on the
contributions made by the former employer – a result the
Government was keen to avoid.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
