The use of large up-front fees and disproportionate deposits has already resulted in significant cost consequences for one care provider.
Organisations who have won contracts from public sector organisations will typically have needed under the government’s Fair Deal guidance to ensure that transferring staff can either remain in their public sector pension scheme or that they are offered a broadly comparable scheme. With the government reforms to public sector pension schemes, most of these public sector schemes will in future be offering a less generous level of benefits. However, it does not seem likely that these changes will automatically apply to broadly comparable schemes set up by private or third sector organisations. This could mean in the future that staff in broadly comparable schemes actually receive more generous benefits than those in the comparable public sector pension scheme.
Organisations which have already set up a broadly comparable scheme in which staff participate should therefore be planning to review the benefits available under that scheme if the scheme rules allow. Consultation with staff or their representatives for a minimum of 60 days will be needed if changes to benefits are made.
Organisations which are considering whether to set up a broadly comparable scheme should look carefully whether they could arrange for the staff to remain in the public sector pension scheme. Failing this, they should consider setting up the scheme in such a way that the benefit changes proposed for the relevant public sector scheme are also built in to that broadly comparable scheme.
Where contracts are coming up for re-tender, contractors which currently have a broadly comparable scheme will be able to continue to offer this, but only if the benefits offered change to reflect those offered by the relevant public sector scheme. Those organisations may simply prefer to offer staff the ability to join the relevant public sector scheme on a re-tender.
Under proposed reforms to the Fair Deal, it is proposed that contractors winning new work will no longer be able to offer broadly comparable schemes, but will need to maintain access for the transferring employees to the relevant public sector scheme – see our previous briefing, The End of Broad Comparability for Public Sector Pensions?
The government may still bring in specific legislation to deal with this issue and it has also been suggested that it may use the Government Actuary Department (GAD) passport certification process to allow benefits to be adjusted, although consultation with affected employees is still likely to be necessary.
For more information
For more information or advice on this issue or on the Fair Deal or public sector pensions generally, contact Doug Mullen on 0121 212 7432 or email@example.com.
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