Fair deal for pensions

In the public sector, pensions are subject to a non-statutory code known as the Fair Deal for Pensions. This says that a new external employer must provide a “broadly comparable pension scheme” for all public sector staff compulsorily transferred from the public to the private sector. The Code also requires new employers to protect accrued pension rights by means of a bulk transfer for staff who decide to transfer their public sector pension benefits to the new scheme.

The government has been consulting on the future of Fair Deal and in November 2012, the Treasury published its response to the consultation. In summary, the Treasury has decided that the obligation on the new employer to provide a “broadly comparable” pension is to be withdrawn. Instead, under a new Fair Deal policy, all compulsorily transferring staff are to be allowed to remain in their public service pension scheme following transfer to the new employer. There is draft guidance attached to the government response. Consultation closed in February 2013. The treasury has published draft guidance which is available on its website.

Under the proposals, access to the Fair Deal public sector pension scheme is to cease to be available to a transferred employee who stops working on their existing contract terms, or who voluntarily moves to a new role with different terms and conditions.

Fair Deal pensions protection is only available to staff who transferred compulsorily from the public sector under the Fair Deal scheme to an external employer. It is not available to incoming members of staff recruited by the employer.

There is to be a separate consultation for local government employees. Changes are expected to be in place by 2015 (2014 for the Local Government Pension Scheme).