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New Fair Deal Guidance requires private sector contractors to participate in public service pension schemes

  • United Kingdom

    08-10-2013

    HM Treasury has issued its new Fair Deal guidance, following a review of the existing Fair Deal guidance. The Fair Deal review is part of the Government's broader review of public sector pensions. The Fair Deal guidance is a non-statutory policy setting out how pensions issues are to be dealt with when staff are compulsorily transferred from the public sector to independent providers delivering public services.

    Commenting on the new Fair Deal guidance Gary Delderfield, head of public sector pensions at international law firm Eversheds LLP, says:

    “The new guidance sets out Treasury's policy for first generation and subsequent transfers from the public to the private sector. Under the new guidance where staff transfer from the public sector for the first time, contractors will (in all but exceptional cases) have to participate directly in the public sector pension scheme which the transferring staff are active members of. There will no longer be an option for contractors to use their own broadly comparable schemes for first generation staff transfers. This is a significant change from the previous position.

    “Another major change is that private sector contractors will be able to participate in the NHS and Civil Service pension schemes for the first time. Everyone is now waiting to find out the terms on which contractors will participate in these schemes as these have not yet been published. These terms will cover important issues such as contributions, exit debts and the need for security such as bonds or guarantees. As ever, the devil will be in the detail.

    “A big shock in the new guidance is that the Treasury has extended Fair Deal to apply to maintained schools (including academies) and any other parts of the public sector under the control of Government ministers where staff are eligible to be members of a public service pension scheme. This was not part of the original consultation and it will have significant implications for how these parts of the public sector operate.”

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