The Sharp End: winter 2013 — out with the old, in with the new… Fair Deal

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By Fraser Sparks

If you have ever worked on a deal involving a business providing services to public sector bodies, you are probably painfully aware of the pensions issues that arise when employees are moved from the public sector to the private sector. Those pensions issues are going to change, and while in some respects the new regime will simplify matters for outsourcing providers, that simplification may come at a cost.

HM Treasury recently published its revised ‘Fair Deal’ policy for pensions, which applies where employees are ‘TUPE transferred’ from central government employment to private sector employment. Previously, this policy required the private sector employer to put in place a pension scheme providing ‘broadly comparable’ benefits to the relevant public sector pension scheme.

The new Fair Deal policy will result in employees staying in their public sector pension scheme, even after their employment has transferred. This means the private sector employer will have to participate in the relevant public sector scheme and sign up to a contract agreeing to pay contributions into it. While this approach is already used by some public sector schemes as an alternative to ‘broadly comparable’ schemes (most notably the Local Government Pension Scheme), it will be a new approach for most. In theory, the new policy applies with immediate effect. In practice, however, we will need to see how long it takes public sector pension schemes to get up to speed with this new approach and to put the mechanisms in place to allow for the participation of private sector employers…

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