A public sector pension scheme is a valuable benefit. Protecting that benefit when staff move from the public sector to the private is a crucial part of any outsourcing contract. Whether you are the outsourcing authority or the contractor providing the service, understanding the pensions issues is critical to the success of any deal.
Where a public sector organisation outsources a service, staff that provide the relevant service automatically transfer under TUPE to the contractor. Pension rights do not automatically transfer (except for certain rights known as Beckmann liabilities), but an outsourcing authority must ensure the contract complies with strict guidance under Fair Deal for public sector employees (and also the Best Value Direction for employees of local authorities and similar authorities). You need to be aware that these protections can be above and beyond those applicable in the private sector – and the employees may have rights that they can enforce directly against you, if you are the employer.
The requirements for pensions protection – and the benefit structures of public sector pensions schemes – are changing as part of the public sector pensions reforms, and we can help you understand the new options becoming available.
Under the revised Fair Deal guidance, if you are a contractor you will be able to become an admission body in the PCSPS and NHSPS (as well as in the LGPS, which has long been the case). You no longer need to offer employees transferring from the PCSPS or NHSPS membership of a broadly comparable pension scheme (together with a bulk transfer of employees' past service pension rights). But a broadly comparable scheme can still be an alternative to becoming an admission body in LGPS (and on the retendering of a contract there may be a bulk transfer of employees' past service pension rights from the incumbent contractor's broadly comparable scheme to the PCSPS or NHSPS).
With experience in working for public authorities as well as private sector contractors – and advising government and regulatory authorities too – we can explain what the issues are, and help you decide what is right for you.
Notable deals / highlights
Helped a Major Provider with pension issues on various outsourcing contracts, including due diligence on the counterparty’s pension arrangements, drafting pension terms for the outsourcing contract and advising on Beckmann liabilities and changes to pension terms following transfer.
Supported the BBC's in-house legal team on a high profile re-tendering exercise, where the complex issues involved included the extent of the application of Fair Deal.
Provided specialist input to the Cabinet Office on the award of the PCSPS administration outsourcing contract to a contractor created as a mutually-owned joint venture as part of a competitive procurement for the administration of one of the largest pension schemes in Western Europe.
Assisted on a major project to create the Care Quality Commission by the amalgamation of three existing healthcare and social care inspectorate commissions.
Advised the Department of Transport on the pensions aspects of a major government outsourcing project, including initial transfer of staff from PCSPS and potential future call-offs from other public sector pension schemes.