Pensions and Employment speak different languages and as an employer it’s important to have a team working for you that understands both.

A recent example arose in the Pensions Ombudsman case of Mr. O (PO-7782).

Mr O worked for a local authority. Following an outsourcing and TUPE he was transferred to Capita Secure Information Solutions Limited. Unsurprisingly, Capita had some cost-cutting targets to meet and notified the Service Desk staff to say that there might need to be staffing reductions.

The staff in question were members of the Local Government Pension Scheme. This provides expensive-to-fund unreduced pension benefits where a member who is 55 or over:

• is made redundant;

• is dismissed on grounds of business efficiency; or

• leaves by mutual consent on grounds of business efficiency.

As Mr O was on sick leave at the time he agreed to a compromise agreement with a £25k payment in exchange for leaving his employment. In his case a pensions top-up would have cost Capita an extra £50k.

Capita had to fill in a form saying what the reason for Mr O’s departure was. This caused issues. Capita tried to say it was by “mutual agreement” but the relevant LGPS form didn’t have that as an option.

It then tried “redundancy” but realised this was an error (and would have triggered the pension benefits). It then ran with “resignation”. The Ombudsman looked at the facts, ran them against the only options available on the form and ordered Capita to resubmit it with “mutual consent on grounds of business efficiency” as the reason. Mr O got his unreduced pension costing Capita £50k and his £25k as well.

There’s always more to these things, but the key thing for this blog entry is to make sure you’re clear on what your pension scheme provides on leaving service. If you have any early retirement/redundancy provisions, they could leave you with an unexpected and very unwelcome bill even if you’ve got all your employment ducks in a row.