What happens to my pension if my employer is taken over?

There are two aspects to this question:

• What happens to the pension you have already built up?
• What happens to your pension in the future?

If you are a member of an occupational pension scheme with your original employer, and you are transfered to a new employer under TUPE regulations, the new employer has an obligation to give you at least some degree of pension provision, as long as you are willing to contribute to it yourself.

This does not mean they have to continue a scheme with the same conditions as your old one, and they will be able to offer you a different scheme, potentially with reduced benefits. They are able to choose whether the new scheme is a salary related defined benefit (DB) scheme or a money purchase defined contribution(DC) scheme - such as a stakeholder.

Employers have an obligation to pay contributions into a new scheme, matching your employee contribution, up to a maximum of 6% of earnings.

This right also applies to you if you were eligible to join the pension scheme under your original employer but did not choose to do so, or if you were due to become eligible to join at the end of a waiting period.

Employees transferred into or out of the public sector should also have pensions protection under a Cabinet directive issued in February 2000. Details can be obtained from your union if you are in this situation.

Your existing pension rights

If the whole business has been bought then the pension fund will be part of the sale. The new employer will take over the rights and duties of the old employer regarding to the scheme. In particular they cannot wind it up, without buying out all the benefits, so the pension benefits you have already built up are protected.

If only part of the business has been bought – or staff are transferred to a contractor who is taking over something the firm itself did previously (such as cleaning or IT services) - then the employees affected will have to leave the pension scheme of their previous employer. They are in exactly the same position with regard to their pension as they would be if they had voluntarily left their job. In other words they can either:

• leave their pension with their old employer and draw a pension from that scheme when they retire, or
• transfer their fund to a new pension provided by the new employer.

You will normally do better by continuing in your previous employer's scheme, unless the new employer is prepared to make sure that your benefits are protected.

The only way to ensure that you do not lose out is if your new employer also runs (or sets up) a final salary scheme and your old employer and the trustees of your old pension scheme both agree to allow a transfer to the new employers that buys equivalent pension rights to those you have built up already in the old scheme.

The very best arrangement is what is called a 'mirror-image' scheme. This is run by the new employer, but in the same way as the old scheme so that it makes no difference to you that you have changed your employer.

The new employer may offer a scheme that is 'broadly comparable'. This will be similar to your old scheme but not identical in every respect. It may be slightly better for some and slightly worse for others.

Again employees in a union will be in a position to negotiate collectively with both their old and new employers and call on expert advice.

There's more information about your pension rights if a new employer wants to change your scheme on the OPAS website.