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Fair Deal for Pensions — public service outsourcing
[ch 12: pages 454-455]In the public sector, pensions are subject to a non-statutory code known as Fair Deal for Pensions. Fair Deal sets out how pension issues are to be dealt with when public sector employees are compulsorily transferred to the private sector (public service outsourcing).
In July 2013, the government made important changes to Fair Deal. In summary, staff who are compulsorily transferred from the public sector must be offered continued access to their existing public service pension scheme, instead of a “broadly comparable” private pension scheme. The same applies to any later compulsory transfers to a different service provider (so-called “second generation” transfers).
Updated guidance, New Fair Deal for staff pensions: Staff transfer from central government, published in October 2013, applies to central government, agencies and the NHS. It also applies to maintained schools (unless covered by other local government arrangements), academies and any other parts of the public sector under ministerial control whose staff qualify for membership of a public service pension scheme.
Under the Fair Deal guidance, staff should remain members of the public sector scheme they belonged to immediately before the transfer as long as they:
• remain continuously employed on the delivery of the outsourced service or function; and
• meet the scheme’s eligibility criteria.
Anyone who was eligible to join the scheme before the transfer but who was not an active scheme member should remain eligible after the transfer.
Fair Deal is only available to staff on a compulsory transfer. It is not available to those who transfer voluntarily, or to existing or new staff of the transferee. Transferring employees who voluntarily move to a different role with new terms and conditions cease to be eligible for Fair Deal.
Contracting authorities must ensure that the contracts of employment of transferring staff contain an express contractual right to remain members of their public sector scheme.
New Fair Deal does not apply yet to local authorities. Instead they remain subject to the Best Value Authorities Staff Transfers (Pensions) Direction 2007 (and the Welsh Authorities Staff Transfers (Pensions) Direction 2012 in Wales). In January 2019, the Ministry of Housing, Communities and Local Government launched a fresh 12-week consultation on the local government pension scheme — Fair Deal, strengthening pension provision — seeking proposals to extend Fair Deal to the local government sector (that is, to preserve membership of the Local Government Pension Scheme (LGPS) on a transfer instead of requiring transferees to provide access to a "broadly comparable" private pension scheme).
The above is a short summary. The Fair Deal guidance can be downloaded from the GOV.UK website.
Advice on pensions should be sought from the pensions specialist at your union and from the Pensions Advisory Service: www.pensionsadvisoryservice.org.uk (tel: 0800 011 3797).