TUPE Pension Liabilities

Procter & Gamble (‘P&G') sold its European tissue towel business to SCA in 2007.  TUPE applied to the sale and the P&G employees transferred to SCA.  P&G operated a defined benefit scheme which provided for early retirement benefits.  The question before the High Court in Procter & Gamble Company v Svenska Cellulosa Aktiebolaget Sca and another [2012] EWCH 1257 was whether liability for those early retirement benefits transferred to SCA.

Under TUPE, occupational pension schemes generally do not transfer from the seller to the buyer.  However, any rights and obligations under an occupational pension scheme which do not relate to benefits for "old age, invalidity or survivors" do transfer under TUPE – the so-called "Beckmann liability".  Under the P&G occupational pension scheme, early retirement was permitted with the employer's consent, and one of the key questions for the High Court was whether that benefit transferred to SCA.  The High Court held that only the employee's right to be considered for early retirement benefits in good faith transferred to the buyer.  It also held that the buyer only assumed liability for enhancements to an early retirement pension that were no longer available to the transferring employee, not for the full amount of the pension (since employees would become deferred members in the seller's scheme in any event). 

This case is helpful in that it clarifies what aspects of an occupational pension scheme transfer under TUPE and the extent of Beckmann liabilities.  However, it also raises some difficult questions (for example, how in practice can a buyer consider an employee for early retirement benefits in the seller's scheme?) and we understand that the decision is likely to be appealed.