Running a pension scheme

Employees' rights - particularly those under a contract of employment - are generally protected under the Transfer of Undertakings (Protection of Employment) (TUPE) legislation when one business is sold to another. See responsibilities to employees if you buy or sell a business.

Legal responsibilities

Although pension rights were specifically excluded from the original TUPE legislation, subsequent legislation has amended the situation:

• if you buy a business which runs an occupational pension scheme for employees, you have to provide those employees with access to a pension scheme that meets certain minimum conditions
• if you buy a business from a public sector body, you must offer transferred employees an occupational pension provision that is broadly comparable to that offered by the public sector body
• if you sell a business you cannot be sued by former employees for breach of contract or constructive dismissal arising from a loss or reduction in their pension rights as a result of the sale

TUPE regulations are particularly complex, so you should consult a solicitor when buying or selling a business. Choose a solicitor for your business.

Buying a business

If you are buying a business, you should consider carefully the liabilities that transfer upon purchase of the new business, for example, a commitment to make employer contributions to personal pensions, or an under-funded final-salary scheme. It is advisable to seek an indemnity from the other party against any possible shortfall. If you are selling a business, the other party may want an indemnity from you.

Either way, the trustees of a final-salary scheme should hear of the potential change as soon as possible. The Pensions Regulator should be informed of it as soon as it has gone through.

There has been an increase in the purchase of businesses for the sole purpose of obtaining the pension scheme. The Pensions Regulator exists to help protect the benefits of members of work-based pension schemes in these situations.