The recent EAT ruling (Bear Scotland v Fulton) has resulted in employers having to review employees’ holiday pay with a view to potentially increasing holiday pay to include contractual overtime where relevant. Increases to holiday pay would mean increases to the overall pay figure (particularly where overtime is frequent or seasonal). Whilst there are several limitations in the judgement on the application of the decision, and the likelihood of an appeal, the judgement raises an important issue in relation to pensions: increases to pay will in many cases mean an increase in the amount of pension contribution required to be paid be the employee and employer. The definition of ‘pensionable pay’ in the pension scheme governing documentation will need to be reviewed. A further issue relates to automatic enrolment: an increase in an employee’s pay (as a result of holiday pay being increased to reflect contractual overtime) may bring employees over the earnings trigger for automatic enrolment (currently £10,000).
Duty to accurately inform members
The Pensions Ombudsman (November 2014) has held that an employer and trustee were in breach of their duties to a member when providing her with incomplete and misleading information regarding an option to opt out of her pension scheme pursuant to an incentive exercise. The member was given an option to receive higher remuneration in return for opting-out of her pension scheme. She was referred to various online information regarding opting-out but was not made aware around the time of her decision that she would be entitled to an unreduced early retirement pension at age 50 if she remained a member in the scheme. As the employer and trustee were held to be in breach of their duties, the Ombudsman ordered that the member be reinstated into the scheme where she would then be entitled to the (financially advantageous) unreduced early retirement pension (potentially at greater expense to the employer). The duties owed by the employer and trustee were to ensure that the member was provided with “accurate information which enabled her to make an informed decision”.