When an employee is successful in a claim for unfair dismissal, the Employment Tribunal will assess compensation, taking into account loss of earnings. This will often include pension loss. The amount of the compensatory award "shall be such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer”.
The question, ultimately for the Court of Appeal, in the case of Aegon UK Corporate Services Ltd v Roberts, was whether pension loss should be considered separately and distinctly from loss of earnings and whether different considerations applied.
Mrs Roberts was dismissed by reason of redundancy by her employer, Aegon. She brought a claim for unfair dismissal and won. In awarding her just over £37,000 in compensation, the tribunal noted that she had found new employment at a higher rate (although that employment had ended 8 months later). The new package left her better off overall despite the move it brought from a final salary scheme to a money purchase arrangement. She was therefore not awarded loss of earnings beyond the start date in her new job. The Tribunal did, however, consider that she had a continuing pension loss. This was owing to the change to the (less favourable) money purchase scheme with her new employer and the Tribunal was of the view that the final salary scheme was a "unique type of benefit".
Aegon appealed to the EAT, arguing that the higher overall package in the new employment offset reduced the pension, making her better off and the tribunal had been wrong to separate earnings and pension in the way it did.
Although the EAT dismissed the appeal, Aegon has been successful in the Court of Appeal. It argued that the tribunal had been wrong to find that Mrs Roberts' final salary pension loss revived after the loss of her new employment when it had already ruled that Aegon was not responsible for her loss of earnings after the loss of her subsequent employment. It was wrong to make a distinction between loss of earnings and pension loss.
The Court of Appeal agreed, ruling that the ET and EAT had applied the wrong principles. Benefits did not have specific status and were not unique. They were important parts of the "whole remuneration package" and different tests could not be applied to different aspects of that package.
This is an important point given the growing scarcity of final salary pension schemes.