Pension protection rights are ‘holding up outsourcing’
By
Richard Johnstone | 10 November 2011
The government's plans to increase competition in
public services can't succeed without changing the pensions protection given to
transferring staff, an actuarial consultancy has warned.
Public sector outsourcing specialists Lane Clark & Peacock
today said the Fair Deal provision, which guarantees ‘broadly comparable’ pensions for staff transferring
to the private sector, is deterring some bidders for public sector work.
LCP’s report, Public sector pensions
reform, says
the Fair Deal provisions can add up to 10% to staff costs for the outsourcing
company, as transferred workers have ‘much higher’ benefits than
the rest of the workforce. It
argues this needs to be changed to allow for more private and voluntary sector companies
to bid for public work.
Greater competition is a main part
of the government’s Open public services
white paper, with the state
having to justify any monopolies.
Earlier this
year, the Treasury consulted on Fair Deal changes, seeking views on whether it
was a barrier to increasing the number of providers and whether it was ‘relevant
to future policy’. A Treasury spokeswoman said the government would respond to
the consultation in due course.
Bart Huby, head of LCP’s public
sector outsourcing group, said that the current system puts some smaller
outsourcing companies off bidding.
Although reforms presented ‘a
significant challenge’, they would lead to ‘more opportunities for a wider
range of organisations to become involved in providing public services’.
The report says that there
have been some outsourcing deals where local authority staff pensions have not
been transferred, instead being retained by the council under a risk-sharing
agreement. These deals should be
signed ‘where possible’, it concluded.
LCP is
also urging contractors bidding for public sector contracts to follow the progress
of the government’s wider public sector pensions reforms. Outsourcing companies
should ensure that new contract terms include ‘sufficient flexibility’ to
reflect any eventual changes.
The government
is proposing to raise the retirement age, increase contributions and replace
final salary schemes with career-average ones, but unions are planning to
strike later this month over the plans.
LCP’s
report was published as two more teaching trade unions announced that their
members have voted to join the Trades Union Congress’ November 30 day of action
against the reforms.
Head
teachers in England and Wales will strike for the first time ever after members
of the National Association
of Head Teachers voted yesterday to walk out.
Members of the Association of Teachers and Lecturers have
also voted to take part in the action.
