Close management of costs is vital to the existence of health and social care providers, due to the substantial cost pressures they face. With pension costs often a significant part of an organisation’s remuneration costs, managing them is key to future sustainability.
Ensuring that tender pricing is competitive is critical to winning new work but, with margins under pressure, under-pricing could also be a significant issue. Getting clarity on the likely pension costs of staff transferring under TUPE is crucial to ensuring a sustainable price. This is particularly important when bidding for contracts where existing or former local government or NHS staff may transfer.
Pension arrangements advice and services for health and social care providers
When bidding for local government or NHS contracts, the requirement to ensure that transferred staff can still access the Local Government Pension Scheme (LGPS) or the NHS Pension Scheme (or a broadly comparable scheme) is more relevant than ever. The risks of variable contribution rates, additional contributions, exit payments and the requirement to obtain a bond are significant and being clear about what risks a contractor is expected to take on is critical. We have considerable experience in advising on, and negotiating, detailed pension arrangements in outsourcing situations and helping providers ensure that they understand the arrangements they are entering into, so that they manage risks appropriately. Our experience in advising commissioners, as well as providers, means that we are able to provide valuable insight into the approach taken.
Providers need to keep in mind that substantial additional pension contributions to the LGPS can be payable, both in redundancy and restructuring situations, but also when staff take early release of pension benefits on grounds of ill health. Often these costs are unavoidable but we have advised a number of LGPS employers on how best to manage change programmes to minimise pension-strain costs on redundancy or business efficiency. We also help employers ensure that decisions on ill-health benefits are appropriately managed to avoid unnecessary costs.
Another way in which we help health and social care providers in the LGPS manage their cost pressures is by ensuring that they have robust policies in place dealing with the exercise of discretions under the regulations. All LGPS employers are required to have these, outlining how certain discretions will be exercised. We can help with formulating and reviewing policies, as well as advising on the exercise of discretions.