Public sector pensions change and reform

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The next few years will see significant changes in the public sector pensions arena. There will be a large number of new public sector pensions as well as changes to the arrangements for outsourcing and a new role for the Pensions Regulator.

At first sight, this may seem unimportant to those working in the private sector, but public sector pensions are an issue for many private sector businesses. This is because outsourcing contracts and other events that give rise to public sector employees transferring to a private sector employer often result in that private sector employer becoming an employer in the public sector pension scheme under a government policy known as ‘Fair Deal’. The upheavals in the public sector pensions are significant enough to give increasing interest to those working outside the public sector.

Public sector pension schemes operate in a manner that is very different from the private sector. Generally, they are established under legislation and their terms are prescribed by statutory instruments rather than trust deeds and rules. Much of the pensions legislation that private sector schemes are so familiar with does not apply, including the scheme-specific funding obligations of part 3 of the Pensions Act 2004, the employer debt provisions under section 75 of the Pensions Act 1995, the member-nominated trustee provisions of sections 241 to 243 of the Pensions Act 2004, eligibility for the Pension Protection Fund under part 2 of the Pensions Act 2004 and section 67 of the Pensions Act 1995 in relation to the changes to subsisting rights under a pension scheme…

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