This should save employers who receive staff transfers significant time and cost in setting up broadly comparable pension arrangements.
Currently, employees can remain in the Local Government Pension scheme by the new employer becoming an admitted body. Not-for-profit employers can obtain direction status in the NHS Pension Scheme as an alternative to providing a broadly comparable scheme. Similarly, teaching staff may be able to remain in the Teachers Pension Scheme. However, these arrangements are not always possible to secure and staff in the Civil Service Pensions Schemes currently cannot remain in this scheme after transfer. New employers may therefore need to offer broadly comparable final salary pension schemes which can be costly to set up.
Chief Secretary to the Treasury, Danny Alexander, has confirmed that legislation will be put before Parliament which will set out arrangements to “replace the current broad comparability and bulk transfer approach under fair deal”. He confirmed the government’s intention to maintain the overall approach under Fair Deal which is to ensure that staff pension rights are maintained on transfer out of the public sector.
Many organisations contracting with the public sector have hoped for a move away from the obligation to maintain existing pension rights for staff transferring out from the public sector and it appears clear this is not going to happen. However, the positive news is that the new legislation will mean organisations no longer have to negotiate and implement bulk transfer arrangements or to have to incur the expense of setting up a broadly comparable scheme.
The Government’s announcement does not clarify what organisations re-tendering for existing contracts where the staff have already transferred out into a broadly comparable scheme will be required to put in place.
We will provide a further update once the draft legislation has been published.
Please contact Matthew Wort on 0121 214 3501, matthew.wort@anthonycollins.com or Douglas Mullen on 0121 212 7432, douglas.mullen@anthonycollins.com.
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