The Importance of Fully Understanding the Implications of a Settlement Agreement Before Signing
The Pensions Ombudsmen has found that an employee that entered into a valid settlement agreement, which stated that she was compulsorily redundant, could not argue that this was not the case - resulting in her being unable to claim an unreduced pension.
Background
Mrs S worked as a HR Manager at AGCO Limited (the Company). The Company was undergoing a restructure and Mrs S negotiated an exit package with the Company and signed a settlement agreement (the SA). The SA stated the reason for termination of employment as 'by reason of Compulsory Redundancy'. A dispute ensued between Mrs S and the trustees of the Company's pension scheme as to whether Mrs S was entitled to a reduced or unreduced pension - a matter dependent on the categorisation of her reason for leaving.
If Mrs S' employment had ended by reason of her voluntary redundancy at the invitation of the Company she would have been entitled to an unreduced pension. If her redundancy had been compulsory she would receive a reduced pension.
The Ombudsman accepted that there was conflicting evidence about whether Mrs S had volunteered for redundancy or whether the redundancy had been compulsory. Unfortunately for Mrs S, the wording of the settlement agreement was clear and she could not now seek to rely on evidence showing that what happened in reality was different to what was set out in the settlement agreement.
Best Practice
When entering into a settlement agreement, both sides should ensure that they fully understand the implications of its terms. This is particularly the case where the employee may be entitled to enhanced pension payments, or other benefits, if the termination of employment is for a particular reason.