November 8, 2014

Guidelines for pension calculations

The Claimant resigned following illness and brought a claim of constructive unfair dismissal and disability discrimination on the basis that her employer had failed to make sufficient effort to allow her to return to work in a way that would accommodate her condition. Her claims were successful but she was unhappy with the financial loss element of the award. The EAT increased this but she was still unhappy and, following a second appeal to the EAT which was dismissed, she appealed to the Court of Appeal. Her main bone of contention was the calculation on the pension element of her claim. She had been in employment with the Trust for a very long time and, given her specialist skills, had not been considering moving employment. Furthermore if she did do so, she would be likely to suffer pension rights losses up to retirement particularly through the loss of a final salary pension scheme.

The Tribunal, upheld by the EAT, had applied the so called simplified approach to her pension loss and she considered that the substantial loss approach should be used. The Court of Appeal agreed: it held that the Tribunal had misdirected itself regarding its reasons for using this simplified approach and that, if it had properly directed itself, it would have come to the conclusion that the substantial loss approach should be adopted.

The guidance used for such calculations has no statutory force and the Court said that its’ recommendations are "not gospel". It was suggested that their use needed to be considered critically as the current version had been in use for over 10 years and there had been many changes in the pension laws during this time. The Court suggested the Tribunals should give priority to producing an updated version on guidelines for calculation of pension loss.

This legal update is provided for general information purposes only and should not be applied to specific circumstances without prior consultation with us.

For further details on any of the issues covered in this update please contact Gemma Ospedale, Partner in Employment on 020 7583 2222.

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