Fair Deal Guidance on pension transfers a potential game changer

Consultants LCP have called the long-awaited, revised Fair Deal Guidance on pension transfer for public sector workers a significant game changer, as it will encourage companies to tender for public sector contracts without taking on defined benefit pension risks.

Under the revised guidance from the Treasury, employees transferring out of many forms of public sector employment as part of outsourcing contracts will be able to remain a member of their existing public service pension scheme. And when an existing outsourcing contract is re-let, the employees will be able to return to the public sector pension scheme of which they were originally a member. This development means that companies involved in public sector outsourcing will not face DB pension risks.

LCP partner and head of public sector outsourcing, Bart Hartby, commented: “The new Fair Deal could be a significant game changer, encouraging companies and charities which had previously been deterred from tendering for public sector contracts because of the DB pensions risks, to do so in future. As such it has the potential to significantly improve the cost-effectiveness for the government of outsourcing public services, although this does need to be balanced against the fact that the state will in future continue to be responsible for providing pensions for outsourced employees.”