In the recent case of Roberts v Aegon UK Corporate Services Ltd the issue of ongoing pension loss was considered in relation to compensation for unfair dismissal.

Mrs Roberts' employment with Aegon terminated in January 2007 by reason of redundancy. She immediately started a new job where she received a more favourable remuneration package however in her new job she only had access to a money purchase pension scheme whereas at Aegon she was a member of a final salary pension scheme.

In September 2007 Mrs Roberts left her new job after a period of ill health and a dispute with her employer. She negotiated an ex-gratia payment and signed a compromise agreement.

The Employment Tribunal upheld an unfair dismissal claim brought by Mrs Roberts against Aegon. However, at a remedy hearing, the Tribunal did not award compensation for loss of earnings because Mrs Roberts' new employment, although not continuing, had broken the chain of causation. Nonetheless, the Tribunal found that there was a continuing pension loss for the reason that "it is unlikely that the Claimant will find employment that will offer a final salary pension. It is more likely that any pension arrangements in her new employment would involve a money purchase scheme".

Aegon appealed against the Tribunal's decision, arguing that pension rights and loss of earnings should not have been treated separately and that Mrs Roberts' new employment should have broken the chain of causation in relation to loss of pension rights in the same way that it had for loss of earnings.

The EAT held:

  • An employee acquiring fresh employment, on the same or better terms, "does not by itself stop the clock running as far as losses flowing from the original dismissal are concerned";
  • In assessing compensation, a Tribunal must compare the two employments "both in purely financial terms and in other benefits which may be incapable of being compared in purely mathematical terms";  
  • The Tribunal was entitled in this case to find as it did that Mrs Roberts' loss of the final salary pension scheme was a unique type of loss.  
  • In particular the Tribunal should have in mind that in a final salary pension scheme the risk is very much on the employer, whereas in a money purchase scheme the risk is very much on the employee.

The EAT emphasised that due to the lack of opportunity to join final salary schemes it is becoming increasingly difficult for Claimants unfairly dismissed from employment in which they were members of a final salary scheme to mitigate their loss. The EAT accepted that Tribunals are entitled to take this on board when assessing compensation.

However this case does not change the existing line of authority that the likely value of any subsequent benefits from membership of a money purchase scheme should be deducted from any compensation for future pension loss.

This case serves as a useful reminder that in an unfair dismissal claim, where an employee has found new employment with comparable earnings, it does not necessarily mean that their losses will be stemmed. Where the employee was a member of a final salary pension scheme ongoing losses could be significant.