Ian Paul McKavney v Serco Group Plc & Ors

In construing pension scheme rules, the court must give substantial weight to the scheme’s language, read in its statutory and practical context. A provision for benefits on compulsory retirement due to redundancy or reorganisation generally requires the member’s employment with the relevant employer to have ended involuntarily. A TUPE transfer does not ordinarily satisfy that requirement because the contract of employment continues by operation of law. The ending of participation in a scheme, or the transfer of employment outside the scheme’s employer group, is not necessarily the ending of employment or of the member’s relevant Service. Construction must also preserve statutory pension protections, including the opportunity to transfer accrued rights within the applicable period.

The appellant was formerly employed by Magnox and became a protected person under the Electricity (Protected Persons) (England and Wales) Pension Regulations 1990. His accrued benefits were transferred from the Electricity Supply Pension Scheme to the Serco Pension and Life Assurance Scheme when his employment transferred to Serco in 2005.

In 2012 his employment transferred under TUPE to ESRC, which was then acquired by AMEC and ceased to participate in the Serco scheme. The appellant retained his accrued Serco benefits and later became redundant from ESRC in 2015. The Deputy Pensions Ombudsman rejected his complaint that the Serco scheme rules required immediate payment of an unreduced pension. The central issue was whether the relevant provisions were triggered by the TUPE transfer, the cessation of scheme membership, or the later redundancy.

1. Appeal dismissed. The appellant did not become entitled to immediate payment of his Serco pension either when ESRC was sold to AMEC or when he was made redundant by ESRC.
2. In construing pension scheme rules, the court must focus principally on the language selected by the draftsman, while taking account of the scheme’s long-term nature, its statutory and fiscal background, its practical operation and the rights of members. This approach was supported by Buckinghamshire v Barnardo’s [2018] UKSC 55.
3. Sub-Rule 4.2.1.3 of Section F required the active member to have been compulsorily retired from Service by the Employer due to redundancy or a reorganisation of the Employer’s business. The phrase imported involuntary termination of the member’s contract of employment. A TUPE transfer changed the employer but did not terminate the contract. The transfer therefore did not amount to compulsory retirement.
4. The word “reorganisation” was not treated as synonymous with redundancy, but it had to be construed alongside compulsory retirement and redundancy. The relevant concept included a reorganisation leading to dismissal other than by reason of redundancy, as illustrated by Shawkat v Nottingham City Hospital NHS Trust (No 2) [2001] IRLR 555. It did not extend to the appellant’s continuing employment following the TUPE transfer and subsequent sale of ESRC.
5. Sub-Rule 6.2.3.1 concerned a member leaving Pensionable Service and whose Service had ended due to redundancy or reorganisation. “Service” ending was distinct from merely leaving Pensionable Service. It contemplated the cessation of employment altogether, not continued employment outside the Serco corporate group.
6. This construction was reinforced by the statutory transfer rights under the PPR. Treating the pension as immediately payable on the transfer would deprive the protected employee of the two-year opportunity to transfer accrued benefits to the new employer’s scheme. Section F was expressly intended to comply with those protections.

• High Court, Chancery Appeals: Mr Justice Trower dismissed the appeal from the Deputy Pensions Ombudsman’s determination dated 30 September 2024.
• Deputy Pensions Ombudsman: The complaint that the appellant was entitled to early payment of his deferred Serco pension benefits was rejected.