In June 2009 we reported on the case of Roberts v Aegon UK Corporate Services Ltd in which the EAT held that pension loss flowing from an unfair dismissal can continue even though an employee obtained permanent employment paying an equivalent or higher salary. This decision has now been overturned by the Court of Appeal.

After Mrs Roberts’ employment with Aegon terminated, she immediately found a new job with a more favourable remuneration package. However, in her new job, she only had access to a money purchase pension scheme whereas at Aegon she had been a member of a final salary pension scheme.

The Employment Tribunal held that, although the overall terms of Mrs Roberts’ financial package (including pension) was higher with her new employer than with Aegon, the final salary scheme she enjoyed with Aegon had been a “unique type of benefit”. The Tribunal therefore held that the loss of her final salary pension was an ongoing loss for which she ought to be compensated, despite the overall terms of her remuneration package being more favourable with her new employer. Mrs Roberts’ new employment therefore did not “break the chain of causation” in respect of pension loss.

This decision was upheld by the Employment Appeal Tribunal and Aegon appealed again to the Court of Appeal. The main thrust of Aegon’s argument was that there was no basis for differentiating the various elements of compensation and pension loss should not be given any special status in circumstances where the employee has secured new employment on more favourable terms.

The Court of Appeal held that:

  • The EAT’s observation that having the benefit of a final salary pension scheme is an unquantifiable benefit which justified pension loss being treated differently was incorrect.
  • Pensions do not have a special status when considering what financial losses flow from an employee’s dismissal: “the pension is simply part of the overall remuneration package – in essence deferred remuneration – albeit an important part, and must be assessed accordingly.”
  • The Tribunal and EAT were therefore not entitled to treat different elements of the remuneration package separately.

However, it is important to note that each case turns on its own facts. Had the various elements of Mrs Roberts’ new financial package (inclusive of pension) been less than her package at Aegon, this case is likely to have been decided differently.