On 4 October 2013 HM Treasury published Fair Deal for staff pensions: staff transfer from central government (Fair Deal 2013). The document maintains the overall approach of previous Fair Deal documents which is that individuals should have their public sector pensions protected by continuing membership following an outsourcing exercise. Fair Deal 2013 applies to academies and maintained schools, as well as a number of public sector organisations.   

In basic terms Fair Deal’s impact is that if a public sector organisation decides to outsource a function to an external provider (e.g. catering, IT), it should ensure that this provider continues to offer and/or provide pension benefits in the same pension scheme.

Below are some key points to note about Fair Deal 2013:

  • It is effective immediately and all those engaged in outsourcing functions should have regard to it.
  • It applies to (amongst others) all maintained schools and academies.
  • It applies to any subsequent transfer, whether this be back in house, or to another provider. The onus is on the provider to ensure that the guidance is complied with moving forwards.
  • The onus is on the contracting employer to ensure that the contractor complies with its obligations (including complying with the terms of the admission agreement it enters into, e.g. to pay employer contributions) and can terminate the outsourcing arrangement if the contractor breaches its obligations.
  • There are notification requirements on the part of the outsourcing employer when it is anticipated that an outsourcing situation may occur.
  • The provision of consistent pension benefits to transferring staff should be an integral part of the procurement process. Again, the onus is on the contracting employer to ensure that the contractor is made aware of its obligations.

The key point for employers is that Fair Deal 2013 states that employees will have an enforceable contractual right to continued membership if they are outsourced to a contractor. If this is the case, should organisations (to whom the guidance applies) fail to comply with the obligations set down in Fair Deal 2013 they could be at risk in relation to employee claims arising out of a breach of this contractual right.

For more information, please contact Jean Boyle by email or telephone 01225 326745