High Court Case - Annette Ellis v. Cabinet Office  EWHC 2049 (Ch)
Subject to appeal?
Cabinet Office has said it will appeal this decision.
Who is this decision relevant to?
Public authorities with outsourced functions. Private sector outsourcing companies. Organisations with defined benefit pension schemes whose trust deeds are not clear on when an active member becomes deferred following a change in position.
Take away points
- Former civil servants who chose not to transfer their benefits to a contractor scheme under Fair Deal may have early retirement rights identical to those of an active member, rather than those applicable to a deferred member.
- Public authorities engaged in previous outsourcing arrangements should consider whether they have any outsourced former staff in the same position as Ms Ellis and who may have increased early retirement rights. Outsourcing organisations should consider whether this decision impacts on their workforce management policies.
- For other organisations with defined benefit pension schemes it is sensible to review the terms of the scheme to confirm when a member moves from active to deferred status, and how it uses terms such as "resigns".
Ms Ellis transferred from the UK Civil Service as part of an outsourcing arrangement. Under the version of the Government's Fair Deal policy applicable at the time, she could join a broadly comparable pension scheme for her service after transfer. This scheme provided benefits based on the PCSPS at the time (Contractor Scheme). These included a right for active members to retire early on an unreduced pension at age 55.
She was also entitled to opt to transfer her accrued service in the PCSPS to the Contractor Scheme. She chose not to do this and the scheme administrator treated her as a deferred member of the PCSPS for those benefits.
At age 55 she decided she wanted to retire. She had a right to retire early in the Contractor Scheme. However, the scheme administrator of the PCSPS said she did not have this early retirement right under that scheme as she was treated as having "resigned" when she was outsourced and was not an active member of the scheme.
Ms Ellis challenged this and was successful at the High Court (following a Pensions Ombudsman decision that found against her). In her appeal, the Court held that she had not "resigned" from service as she had been subject to a compulsory transfer to the contractor. She therefore kept her right to retire at 55 on an unreduced pension.