The Court of Appeal has overturned a decision of the High Court, finding that:
The Court of Appeal concluded that the Cabinet Office’s appeal should be allowed. It found that Ms Ellis was no longer entitled to retire at age 55 without a reduction being applied to her pension, nor to benefits calculated on a favourable basis for long service.
Ms Ellis became a prison officer in May 1986. She joined the “Classic” section of the PCSPS and had a right to retire at age 55 without a reduction in pension provided that she was then in service. She was also entitled to double service counting after the first 20 years of her service, i.e. after 20 years, each further year counts as two for the purposes of accruing pension rights.
In 1987 a new scheme was introduced but Ms Ellis’ pension rights (past and future) were not affected.
In 2011, Ms Ellis was informed that she was going to be transferred (under TUPE) to a private sector contractor (G4S).
Broadly, TUPE transfers the employment obligations of a former employer, in respect of transferring employees, to a new employer. But in general, pension benefits do not transfer as TUPE contains an exemption in respect of benefits under occupational pension schemes relating to “old age, invalidity and survivors”.
In January 2000, the Cabinet Office issued a document called “Staff Transfers in the Public Sector, Statement of Practice Guidance”, known as the “Fair Deal”. The Fair Deal sets out how public sector organisations should apply Government policy in the treatment of bulk transfers between the public and private sector. In broad terms, the Fair Deal requires the private contractor to provide pension arrangements which are at least “broadly comparable” to the public sector pension scheme that the transferring staff are leaving. The transferring employees must then be given the option of transferring their accrued pension benefits to the contractor’s “broadly comparable” scheme.
In Ms Ellis’ case, prison staff were given three options in respect of their pension benefits:
The last option was not open to Ms Ellis as she was not over age 50 at the time of the transfer.
The PCSPS rules state that a member who “resigns or opts out of the scheme” without transferring their benefits is entitled to a preserved pension and lump sum at age 60: “’Resignation’ means termination of service or voluntary retirement from the Civil Service before the pension age”.
Ms Ellis was told that if she chose the first option, under the rules of the PCSPS she would not be able to take her deferred pension unreduced until the age of 60. However, were she to transfer to the G4S scheme, she would have a right to retire on an unreduced pension from age 55.
On 1 October 2011, Ms Ellis’s employment was transferred, under TUPE, to G4S. Due to her concerns about the G4S scheme, Ms Ellis opted to leave her pension in the PCSPS.
Ms Ellis brought claims through the PCSPS’s IDRP and to the PO that, under the rules of the PCSPS, she remained entitled to retire on an unreduced pension from age 55. She argued that she had not “resigned” from her employment in any normal sense of the word. She was still working at the prison and wished to continue to do so until she was entitled to a full pension.
The IDRP and the PO concluded that Ms Ellis was not entitled to an unreduced pension from age 55. Their key finding was that the transfer of her employment to G4S terminated her service with the Prison Service (now National Offender Management Service) and that termination of service is treated as resignation under the PCSPS rules.
The High Court decision of 6 June 2014 (see the summary in our Pensions Wiki), found that the PO had taken into account irrelevant factors in its decision, and that it had wrongly interpreted provisions of the PCSPS. Mrs Justice Rose considered the PO’s decision to have misconstrued the meaning of the term ‘resignation’, and she determined that a wide interpretation of the word would be inconsistent with the structure of the rules.
The High Court therefore concluded that, despite the transfer of her employment to a private contractor, Ms Ellis remained entitled to retire at age 55 without a reduction being applied to her pension. Her appeal was allowed.
The Court of Appeal held that, on a true construction of the PCSPS rules, “resignation” had a wide meaning which encompassed both voluntary and involuntary departure from the Civil Service and would include a transfer of an undertaking to the private sector.
Vos LJ held that, in his opinion, the definition of “Resignation” in the rules was clear in itself – in other words, that despite its “ordinary” or “normal” meaning, it extended to involuntary terminations of service.
He continued that, even if the definition was ambiguous, there were clear pointers that involuntary departure did fall within that term under the rules, stating that: “I do not think the normal meaning of the word “resignation” provides any justification for ignoring the relatively clear words of the extended definition the draftsman has accorded to it.”
The context of the original rules was also carefully considered. Having been drafted in 1972, neither TUPE nor the Fair Deal were in contemplation at the time. However, as Vos LJ noted, that the draftsman had clearly contemplated both voluntary and involuntary departures.
Vos LJ also determined that the PO had not taken into account irrelevant considerations when construing the rules. This was in contrast to the position of the High Court judge, who had taken into account the fact that Ms Ellis had had the option of transferring to the G4S pension scheme, and thereby retaining the right to take an unreduced pension at age 55, when she overturned the PO’s decision.
The new Fair Deal (published in 2013) now allows public sector workers to remain members of their public service schemes for future service rights. This means that the separation of past and future service rights which led to this case is unlikely to happen in future.