Contesting the new Alliance Boots staff pension scheme

In its place the company introduced a 'defined contribution scheme' the final benefits of which will depend on the contributions made by the employee (supplemented by the employer).

There are more than 1000 PDA members working at Alliance Boots and on their behalf we took issue with the following matters;

The current scheme was not in deficit

The final salary scheme had already been closed to new staff and as it was in surplus, there seemed to us to be no main reason for the company to change the scheme for current members other than to take advantage of the current downturn in the economy to reduce its contributions to the pension fund and transfer greater risk from the employer on to the individual.

Financial implications

Our members who were currently in the defined benefits scheme could be disadvantaged financially by being moved to the new scheme. Although the company state that pharmacists will receive a contribution of employee to employer of 1:2, this may not compensate for the losses they would have accrued through staying in the original scheme.

The method used to close the scheme

Having made a proposal to cease accrual of benefits under the scheme the method used by the company to achieve this was in our opinion and that of our expert advisors not illegal, but not within the spirit of the law.

The vehicle used by the company to move employees from one scheme to another was TUPE -Transfer of Undertakings (Protection of Employees) legislation. The original purpose of this was to protect employees' rights when they have been taken over by another employer; however pensions are exempt from transfer under this legislation and by setting up a new company (a vehicle still owned by Alliance Boots) and transferring all employees into it, Boots had no obligation to transfer the original, more preferential pension scheme with the employee. If the employee had refused to transfer to the new company then potentially they could have been dismissed. We believed that this was using the TUPE legislation for purposes for which it was not intended. And frankly what option did the employee have but to accept it?

The consultation

We wrote to the Chief Executive of Alliance Boots setting out our concerns and they have set out to justify their consultation process. We have pointed out in reply that:

• Although the company was obviously happy to consult with the 'in house' Boots Pharmacists' Association (BPA), it did not appear to wish to do so with the PDA even though PDA has more pharmacist members than does the BPA.
• The company argued that it would have been prepared to stop the reform of the scheme based on the results of the consultation process, but we find this difficult to accept given the time taken within which such a major decision was made. This massive logistical exercise involved consulting with 45,000 employees, amending the proposals, getting applications made to the new scheme and transferring everyone to the new management services company. This could not have been done without many months of preparation yet executed in three to four months (however, this timescale did comply with the legal requirements for consulting with employees).

• We have asked why the TUPE regulations were used for purposes for which they were not intended, but have received no response.

Members' rights to reserve their position

Within the process, there appeared to be no space for contingency; this was a company with a mission! Many of our affected members were concerned and wanted to know how they could resist the momentum and how to protect their rights. We recommended that they should enter into the new pension arrangement so as they would not be disadvantaged but should "reserve their rights" to challenge the clause which made it conditional that they waive their rights to any accrued benefits from the 'old' scheme. This would create a true test of the company's flexibility.

However, Alliance Boots informed the PDA that they would not accept any 'reserving of rights' and would deem such applications to be invalid thus making members ineligible for entry into the new scheme from 1st July and that as a consequence their death in service benefit would be affected.

The PDA had taken expert, independent legal advice at every step of the process and passed it on to our members. We believe that our advice was appropriate and reasonable.

The PDA has reverted to the Pensions Ombudsman in the hope that they will make a challenge. However, we have been warned that the likelihood of success is limited. Through our parliamentary connections, our hope is that in future, at least the loophole in TUPE legislation can be closed to prevent large employers using TUPE in such a way.

The PDA awaits a response from the Pensions Ombudsman.