UK - Pension rights for thousands of workers will be scupperedif the government upholds Pickering's proposals on instant vesting, leading lawyers warn.
Hammond Suddards Edge partner Francois Barker said a move by the Department for Work and Pensions to abolish vesting periods would clash with regulations in the Employment Act on fixed-term workers.
Under these regulations a firm can use a scheme’s probationary period – if longer than a fixed term-workers’ tenure – to “objectively justify” not allowing fixed-term workers entrance to a pension scheme.
But Barker warned that with instant vesting, firms will look to extending a scheme’s waiting period to justify excluding fixed-term staff – and this would be detrimental to the pensions entitlement of all staff.
He said: “At present, many employers are using long vesting periods as justification for not letting fixed-term workers into their pension schemes. But if the vesting period was abolished, firms would have no option but to give fixed-term workers access to their pension scheme.”
He added that the easiest way for firms to exclude fixed-term staff would be to extend waiting periods to mirror the previous vesting period, which could be as long as two years.
And CMS Cameron McKenna partner Mark Grant said that under the Human Rights Act, any move to extend the waiting period of a scheme would have to be applied to all staff.
“You have to treat all categories of employees the same, so if a two-year waiting period for a pension scheme was introduced, it would have to be applied across the board. And if you start to leave people out, this would be a form of discrimination.”
Grant added that if a company did not extend the waiting period, the only other way an employer can justify not allowing fixed-term workers access to a scheme is by compensating them with an “enhanced” employment package, which is “very difficult” to evaluate accurately.
• The new regulations for fixed-term workers under the Employment Act 2002 come into force on October 1.
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