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.