Court of Appeal: civil servant whose job was outsourced to private sector could not retain full pension rights

The job of Annette Ellis, a prison officer at Birmingham Prison, had transferred from the public sector to private contractor G4S in 2011 under the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations, which protect the rights of an employee if their employer is taken over by a new owner or the work that they provide is outsourced or brought back in house. The Court of Appeal found that the word "resignation" in the scheme rules included both voluntary and involuntary forms of termination of employment.

Lord Justice Vos said that it was important "understand the context" in which the scheme rules, which dated back to 1972, were drafted.

"At that time, as both parties accepted, it is unlikely that transfers of undertakings from the public to the private sector were much in anyone's mind," he said.

"What must, however, have been in the draftsman's mind was the possibility that actions would be taken which would result in civil servants leaving the Civil Service both voluntarily and involuntarily ... [I]t makes business sense to think that the draftsman would have wanted to make provision somewhere for involuntary departures from Civil Service employment ... There is no reason in the rules to think that he was making provision for what should happen on dismissal or redundancy but not for any other kind of involuntary departure," he said.

The Court of Appeal overturned an earlier judgment by the High Court, which had "placed great emphasis on the normal meaning of 'resignation'", according to the judgment.

"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," he said.

When the outsourcing in this case took place, Ellis was given the option of either preserving her existing pension rights within the PCSPS or transferring her benefits out of the scheme into the G4S pension scheme. She chose the first of these options so that she could retain her existing benefits, which included both a right to retire at 55 without a reduction in her pension provided that she was still working for the same employer and a right to 'double-count' each year of service for pension purposes after her first 20 years of service.

After the transfer took place, she was informed by the Cabinet Office and PCSPS scheme administrators that she would not be entitled to take her preserved pension until she turned 60. She complained to the Pensions Ombudsman, who rejected her complaint on the grounds that the scheme's definition of 'resignation' was "wider than that word is generally used to mean, as it includes any termination of service before pension age".

The Court of Appeal said that the ombudsman was "right to construe [the scheme rules] as he did".

Staff who have been compulsorily transferred out of the public sector may now remain members of their public sector pension scheme after the transfer, following an update to the government's non-statutory 'Fair Deal' guidance in October 2013. Before this, private sector providers only had to guarantee outsourced employees with a "broadly comparable" pension scheme.