Ian Paul McKavney v Serco Group Plc & Ors

This High Court appeal was about a narrow but commercially important pensions question. When an employee with protected legacy rights moved out of the Serco group under TUPE and later became redundant with a different employer, did the Serco scheme have to start paying his pension immediately and without early payment reduction?

The court said no. It upheld the Pensions Ombudsman and found that, on the wording of the scheme considered here, the 2012 transfer and sale did not amount to the kind of compulsory retirement, redundancy or reorganisation that triggered immediate payment from the Serco scheme.

Mr McKavney started at Magnox and built up rights in the Electricity Supply Pension Scheme. He was also a protected person under the 1990 protected persons regulations, which were designed to preserve pension protection for certain electricity industry employees when they moved within the industry.

In 2005, his employment transferred from Magnox to E&TS and then to Serco. A special Section F was added to the Serco Pension and Life Assurance Scheme for former Magnox members. Mr McKavney chose to transfer his accrued ESPS benefits into the Serco scheme and became a Protected Magnox Member.

Section F mattered because it was intended to operate as an alternative scheme for protected employees and was expressly stated to be subject to the protected persons regulations. That meant the court did not read the pension wording in isolation. It read it against the statutory protection framework that applied to this employee group.

In June 2012, his employment transferred from Serco to ESRC under TUPE. A week later, AMEC bought ESRC. That meant ESRC ceased to be a participating employer in the Serco scheme and became a participating employer in the AMEC scheme.

At that point, former Section F members were told they had a legal right under the protected persons regulations to transfer their accrued rights from the Serco scheme to the AMEC scheme within two years. Mr McKavney did not transfer.

He later argued that the move out of the Serco group in 2012 should have triggered immediate payment of his Serco pension. He also argued, in the alternative, that his later redundancy from ESRC in November 2015 should have done so. The Ombudsman rejected those arguments, and he appealed to the High Court on a point of law about the correct interpretation of the scheme rules.

The appeal was not a broad challenge to TUPE itself. It was a point of law about how the relevant pension rules should be interpreted. The court had to decide whether Section F of the Serco scheme gave Mr McKavney an immediate right to early pension payment when his employment moved out of the Serco group in 2012, or when he was later made redundant by ESRC in 2015.

That required the court to look closely at two parts of Section F. One dealt with early retirement of an active member where the member was compulsorily retired from service by the employer due to redundancy or a reorganisation of the employer’s business. The other dealt with a member who left pensionable service and whose service ended, in the trustees’ opinion, due to redundancy or a reorganisation of the employers’ business.

The court also had to read those provisions against the legal effect of TUPE. Under TUPE, the transfer does not terminate the employee’s contract of employment. Instead, the contract continues as if originally made with the transferee, subject to the separate rule that occupational pension rights are treated differently in some respects.

Another important part of the context was the protected persons regulations. In this setting, those regulations gave protected employees a right, within two years of transfer, to move accrued rights into the new employer’s relevant scheme. The court considered whether Mr McKavney’s interpretation would fit with that structure.

The High Court dismissed the appeal. Mr Justice Trower agreed in substance with the Ombudsman that Serco and the trustees had correctly interpreted and applied the relevant rules. Mr McKavney was not entitled to immediate payment of his Serco pension either when ESRC was sold out of the Serco group in 2012 or when he was later made redundant by ESRC in 2015.

On the first route argued by Mr McKavney, the court focused on the wording about a member being compulsorily retired from service by the employer. The judge said that language more naturally describes employment ending through termination of the contract, rather than a TUPE transfer where the contract continues by operation of law with a new employer.

The court accepted that, after the sale to AMEC, Mr McKavney was no longer employed by an employer within the scheme definition and so was no longer in service in that defined sense. But that did not mean he had been compulsorily retired from service for the purpose of the early retirement rule. His employment had continued without cessation.

The court also rejected the idea that what happened amounted to redundancy. Redundancy has a technical meaning linked to dismissal for a particular reason. That was not what occurred in 2012. The transfer and sale moved the employment relationship to a different employer, but did not dismiss him.

On reorganisation, the court accepted that a business reorganisation can take many forms. Even so, the word had to be read in context. Here, it appeared alongside compulsory retirement from service and redundancy. The judge considered that the drafting pointed more naturally to a reorganisation leading to dismissal, rather than a transfer where employment continues.

The second route argued by Mr McKavney relied on the rule dealing with termination of pensionable service. The court accepted that he had left pensionable service when ESRC ceased to be a participating employer in the Serco scheme. But the judge agreed with the Ombudsman that the rule required more than that. It referred to the member’s service ending, and that wording was treated as different from merely leaving pensionable service.

In the court’s view, the contrast in language showed that the drafter intended to distinguish between stopping active participation in the scheme and employment ceasing altogether. Mr McKavney had left pensionable service, but his employment had continued outside the Serco group. That was not enough to trigger immediate payment under the rule.

The court also thought Mr McKavney’s interpretation sat awkwardly with the protected persons regulations. If immediate payment arose automatically as soon as he was no longer in service with a participating employer, that would undermine the separate right to transfer accrued rights into the new employer’s scheme within two years. Section F itself said it was intended to meet the requirements of the protected persons regulations and was subject to them. That made Mr McKavney’s reading less likely.

This is not a general rule for all pension schemes or all TUPE transfers. It is a fact-specific pensions interpretation decision about protected electricity industry rights, a legacy defined benefit structure and the wording of Section F of the Serco scheme. That said, the commercial lesson is durable.

In transactions, businesses often use shorthand such as transfer, reorganisation, redundancy event or exit from the group. This case shows that those labels can be misleading if they are not tied back to the actual legal wording in the pension documents. A move out of a group may end active membership in one scheme without ending employment. That difference can decide whether benefits are payable immediately, deferred, or transferable.

The case also shows why election windows matter. Here, the employee had a protected right to transfer accrued rights into the new employer’s scheme within two years. The court treated that right as an important part of the context. If your business gives employees a transfer option after a deal, the existence and timing of that option may affect how the old scheme rules are read.

For smaller businesses, the practical risk is usually not the court case itself. The real risk is getting the pension position wrong during diligence, pricing, employee consultation or post-completion administration. If staff have protected or ring-fenced rights, a short generic FAQ may not be enough.

If your business is buying, selling or reorganising a business unit with staff, pension diligence should start early. This case shows how disputes can turn on the interaction between old scheme wording, transfer legislation and what employees were told at the time.

Focus on the documents that define rights and the documents that explain options. If those do not line up, the business may face complaints long after the transaction has closed.

The case reached the High Court as an appeal from a determination of the Deputy Pensions Ombudsman dated 30 September 2024. The appeal was limited to a point of law about whether the relevant rules had been correctly interpreted and applied.

By the time of the hearing, the only active respondents were Serco and the trustees of the Serco scheme. The hearing took place on 19 February 2026 before Mr Justice Trower, and judgment was handed down on 10 March 2026. The appeal was dismissed.

For businesses, that procedural history matters because it shows the court was not re-running every factual complaint. It was deciding whether the Ombudsman’s legal reading of the pension rules was wrong. The court concluded it was not.

This decision does not create a broad rule that any employee over 50 who leaves a participating employer after a transfer must receive an immediate pension. The court’s reasoning depended on the exact wording of Section F, the legal effect of TUPE and the protected transfer rights available in this electricity industry setting.

It also does not mean that pension rights are irrelevant in a TUPE deal. The opposite is true. The case shows that pension rights can be central, but the answer may depend on distinctions that are easy to miss in commercial planning, such as the difference between leaving pensionable service and employment actually ending.