Pension Issues on Outsourcing

    View Authors October 2013
    This week the Government has issued an updated policy protecting the pensions of public sector employees who are transferred to the private sector as part of an outsourcing. This is known as “Fair Deal”. The changes will have a profound impact on public service pension schemes and private sector contractors:

    • For the first time, transferred staff will have a contractual right to continue participation in (or to re-join) the relevant public service pension scheme. This will impact how pension costs and risk are priced in bids for outsourcing contracts.
    • Public service pension scheme administrators will have to adopt processes to manage an increased number of employers – both the information flows needed to administer the scheme and an assessment of the impact of the risk of employer failure.
    • Trustees and sponsoring employers of private sector pension plans currently providing broadly comparable benefits should consider the potential impact on their plan of members transferring back into a public service pension scheme and whether pre-emptive action should be taken.