STATUTORY MATERNITY PAY AND PROTECTION OF PENSIONS FOLLOWING A TUPE TRANSFER

Statutory Maternity Pay

Alan Johnson, the Minister for Work and Pensions has announced the rates of maternity, paternity and adoption pay that will apply from April 2005. The rates will come into force in the first full week of the 2005/6 tax year.

The standard rate of statutory maternity, paternity and adoption pay will rise from the current rate of £102.80 to £106 per week. The earnings threshold for the purpose of the statutory pay entitlement will also rise from then current rate of £79 to £82 per week.

Additional Burden for Employers Acquiring New Employees Under TUPE

The Government has issued a consultation paper and draft Regulations under the Pensions Act 2004, which will protect the pensions of employees working for companies that are taken over.

It is expected that from April next year, where there is a business transfer covered by Transfer of Undertakings (Protection of Employment) Regulations 1981 (“TUPE”) and the employer contributes to an occupational pension scheme, transferred employees will have the right to an ongoing employer pension provision from the new employer. In such circumstances, the new employer must offer the transferred employee membership of one of the following schemes;

· A defined benefit pension scheme (i.e. final salary);

· A defined contribution pension scheme (i.e. money purchase); or

· A stakeholder pension scheme, to which the employer must make contributions.

Where the scheme offered is a defined contribution or stakeholder arrangement, the new employer must match the employee’s contributions up to a prescribed level (to be set at 6 per cent of pensionable pay).

The pension provision offered by the new employee will form part of the transferred employee’s contract of employment and can only be changed if both parties agree.

It is arguable that European Court rulings already mean that, where employees have previously been members of a deferred benefit pension scheme, acquirers of a business automatically inherent some liability to provide such a scheme. These new pension provisions will, however, recognise the new employer’s liability in a UK statute for the first time.

The consultation period will run until 21 January 2005 and, depending upon the response, the Government will seek to implement the Regulations in April 2005.