Fair Deal guidance – New and improved?

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On 4 October 2013 HM Treasury published new guidance in relation to treatment of pension entitlements for staff who are transferred out of the public sector as part of the outsourcing of public services (known as "Fair Deal").

This is the first wholesale revision to the "Fair Deal Policy" since it was introduced in 1999, with the aim of ensuring that staff who transfer out of the public sector as part of a compulsory transfer will still have access to good quality pensions. Under the original "Fair Deal", pensions could be provided either by a scheme that was "broadly comparable" to the public sector scheme that staff were leaving (either keeping their existing benefits in the public sector scheme or transferring them to the new arrangement) or by staff remaining in the public sector scheme provided that the new employer met the conditions to participate in this arrangement.

The new Fair Deal guidance rather turns the tables by expecting membership of the public sector scheme to continue for the transferring employees who were already members or eligible to join before the transfer, rather than by offering a broadly comparable scheme.

The scope of the new Fair Deal has also been widened to include academies, some maintained schools and any other parts of the public sector under the control of Government ministers where staff are eligible to join a public sector pension scheme.

In order to offer membership of a public sector scheme, the new employers will have to become a participating employer in the public sector scheme, enter into an agreement with the scheme to this effect and the Fair Deal requirements will continue to apply to these staff on any subsequent transfer to another employer.

Whilst the new guidance applies immediately, certain amendments will need to be made to some public sector schemes. Until those changes are made, the old fair deal guidance will continue to apply. However, the new guidance must be complied with in all circumstances from 1 April 2015.

The new Fair Deal guidance can be viewed online here.

On any transfer of staff from the public sector, or a subsequent transfer from an existing contractor, it is important to ensure that the Fair Deal guidance is considered as part of any tendering process and properly complied with. We have a broad experience in public outsourcing and are able to help with the practicalities of this process.