Heather Wakefield (see yesterday's PF Blog) and the LGA are right to draw attention to the risks and potential financial consequences for the state and individuals if the government presses ahead with the increases to employee contributions to the Local Government Pension Scheme.
A further threat to the LGPS comes from those arguing that the 'Fair Deal for Staff Pensions' arrangement should be abolished. This was published by the Treasury in 2004. As a consequence of it currently the majority of employees who transfer under TUPE to the private sector and many, but not as many, who transfer to the third sector are able to continue their membership of the same or a comparable scheme. In the case of local government private and third sector employers can have Admitted Body Status to the LGPS. The major contractors take advantage of the arrangement.
This provides employees with some comfort and continuation of contributions. It removes anxiety. It avoids tenders being won on the basis of who can offer the cheapest price at the expense of staff pensions. And above all it maintains employee and employer contributions to the pension fund itself.
The government has signalled its desire for more services to be outsourced to the private and third sectors. If this happens the pension scheme will be weakened if at the same time the government takes action which would result in lower levels of finance for the fund.
The major private sector public service contractors welcomed the introduction of the Admitted Body Status arrangement and took advantage of it. Naturally they would expect public sector clients to reflect the costs and risks associated with Admitted Body Status in the contract payments. For SMEs and community, voluntary and third sector providers there is a case for a collective approach to underpinning the liabilities associated with Admitted Body Status.
There are strong arguments for reform to public sector pensions and we await the publication of John Hutton’s final report. But let’s not confuse the wider reform with the 'Fair Deal for Staff Pensions' or the Admitted Body Status in the LGPS.
Whilst there are some calls from some in both the private and third sectors for government to end a requirement to provide comparable pensions to staff who transfer under TUPE, this would be a retrograde step socially and economically. In the case of local government if it led to the end of Admitted Body Status it would seriously damage the sector’s pension scheme.
John Tizard is director of the Centre for Public Service Partnerships
