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The European court is affecting all areas of UK industry, and pensions are no exception. Monica Ma considers some of the up-coming developments Whether or not we eventually opt for the Euro, there is no escaping the fact that European court decisions and council directives are affecting all areas of law in this country. European influence has always been most keenly felt in the area of sex equality. Decisions such as Barber and Preston have dramatically changed the pension scene in this country and some schemes are still trying to deal with the implications of those decisions. But if you think that the European courts have said all they can on this issue, you will be disappointed. Recently the Court of Appeal decided to refer a case centred around pensions to the European courts. Broadly, the issue was whether the exclusion of workers employed under contracts for services from a pension scheme constituted indirect sex discrimination when a significantly greater number of women than men were excluded. In Allonby v Accrington and Rossendale College, Mrs Allonby, a part-time lecturer, provided services to the college via an agency. She was treated by the college as self-employed and was denied certain benefits, including access to the pension scheme. This was on the basis that under the Teachers’ Superannuation (Consolidation) Regulations 1998, eligibility is confined to employees with contracts of service (as distinct from a contract for service). Mrs Allonby claimed to be entitled to equal treatment in accordance with section 62(3) of the Pensions Act 1995. She argued that, though “employed” was not directly defined in the 1995 Act, section 63(4) of the 1995 Act requires that section 62 be construed as one with section 1 of the Equal Pay Act 1970. Therefore, she claimed, “employed” is defined to mean employed under a contract of service or a contract personally to execute work or labour, the latter of which covered her situation. She also argued that, in any event, the purpose of the 1995 Act was to give equal pension rights to part-time employees. Depending on the court decision, the case could have far reaching consequences. In various industries, agency staff are regularly used. If they can claim pension benefits from companies to which they provide services, the additional costs and administrative hassles cannot be underestimated. (There will also be Inland Revenue issues – unless the European courts limit their decision to industry wide schemes like the teachers’ pension schemes – since the Inland Revenue does not normally allow unassociated employers to participate in the same scheme.) While the effect of much European intervention has been to extend pension benefits to wider classes of employees, this is not always the case. In Defreyn v Sabena, the employee was made redundant and under a collective agreement received “unemployment benefit” from her employer until the state pension became payable at age 60. She argued that, like a male equivalent employee, the benefit should be paid until age 65 (when the state pension was paid to men). Her employer argued that the benefit in question was covered by the Maastricht protocol to article 119 (now 141) of the Treaty of Rome which limits equal treatment to benefits referable to employment on or after 17 May 1990 – she ceased to be employed in 1986. The European courts agreed. TUPE
or not TUPE While the statutory position seems fairly clear cut, the European courts have nevertheless been asked to consider the scope of TUPE and the Acquired Rights Directive in Beckmann v Dynamo Whicheloe MacFarlane and Martin v South Bank University. Both cases relate to the employee’s entitlement to early pension benefits on being made redundant following a TUPE transfer. The European courts have been asked to consider whether the payment of enhanced pension benefits to employees made redundant after a transfer was covered by TUPE and the Acquired Rights Directive. In effect, the question asked was whether the entitlement to such benefits was a right to old age, invalidity or survivor’s benefit within the meaning of Article 3.3 of the directive. If they were, then they would be excluded from the transfer and the transferee would not have an obligation under TUPE to replicate the benefits. If the answer is no, then the Court of Appeal have also asked whether there is an obligation on the transferor arising from the contract of employment, the employment relationship or the collective agreement, which was passed on because of the transfer and rendered the transferee liable to pay the benefits to the employee upon dismissal. It
is too early to say how important the European courts’ decisions
in these cases will be. This will depend on the European courts’
answers to the questions posed to them. The fact that pensions are
not protected at all under TUPE is never a satisfactory position
and is unlikely to last, so the government’s up-coming consultation
paper on extending TUPE to occupational pensions will be hotly anticipated.
In the pipeline As regards sexual orientation, discrimination against same sex partners would certainly not be allowed and it will be interesting to see what impact this has on UK pensions law. Will it still be legal on the death of a member to provide a pension only to his spouse but not to, say, a same sex partner? Previous challenges have failed on the basis that it was legal to provide benefits only to a couple who has entered into the marriage institution. However, this is a moving target. Also, the European Commission is looking at improving choices open to workers who wish to exercise their right to freedom of movement within the EU. The aim is to ensure that those workers who want to work in another member state will be able to benefit from the same tax advantages on pensions as workers who remain in their home member state. Current
plans are apparently in disarray because of the different tax and
transferring out rules between the states. This is, however, an
area to watch. The Commission is also proposing to formalise EU
co-operation on pensions and has published a policy paper which
sets out ten objectives for each member state. The
three most important objectives, referred to as “the three pillars”
of pension systems are: Finally, a draft directive on pan-European pension schemes is causing some concern, principally because it is over-prescriptive. In particular, it raises the possibility of a quasi minimum funding requirement – just when you thought MFR was on the way out. Monica
Ma is a partner in the Pensions & Employee Benefits Department of
Simmons & Simmons – Pensions Age September 2001 – BACK
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