The Big Society means services will be provided by a wide variety of organisations. So how will that affect areas such as providing pension schemes?
as debate rages over the coalition’s Big Society vision, it is easy to overlook the fact that public services have been carried out for years by a range of providers.
GPs, for example, provide frontline health care and are an integral part of the NHS – but they are private businesses. Elsewhere, charities and other non-governmental organisations are involved in specialist nursing, hospice care and medical research that form part of the wider health network.
Similarly, in the local government sector, NGOs provide a diverse range of services, from housing and local economic development through to social care, education, leisure and the arts. Add to this mix the many services and functions that have been outsourced to the private sector, and what we have is a complex pattern of service provision.
In many cases, the formation, growth and continued existence of the organisations that have taken on these roles are heavily dependent on the ability and willingness of employees
to move from the public sector to the non-governmental sector.
Over the years, public sector pension schemes have adapted so that the loss of pension provision does not become a barrier to movement. In the NHS, the secretary of state has the power to ‘direct’ that certain organisations or groups of employees within organisations outside the NHS can participate in the NHS Pension Scheme.
Today, some 400 ‘direction’ employers and more than 8,200 GP practices are covered by the NHS scheme. These include organisations such as Central Surrey Health. Formed in 2006, this social enterprise is a limited company co-owned by employees who previously provided community nursing and therapy services from within the primary care trust.
Similar provisions exist in the Local Government Pension Scheme, where organisations that share ‘a community of interest’ with local government can be granted admission to the scheme. Across the UK, there are many thousands of these ‘admitted’ bodies.
However, a large part of the Big Society initiative focuses on finding innovative new ways of providing public services and enabling more provision by charities, social enterprises and private companies. It is therefore likely to involve new organisational forms. The Localism and Health & Social Care Bills contain provisions to enable and promote new providers, such as employee-owned social enterprises, mutuals, public-private consortiums and co-operatives.
These new types of organisation will need to consider how they approach issues such as legal structures and taxation; and how trading activity will be managed and organised (particularly in the case of charities). CIPFA’s ‘Social enterprise in a box’ aims to support local authorities, PCTs, GPs, social entrepreneurs and other promoters of social enterprise organisations in precisely these areas by providing a suite of advice and support services.
But the questions extend beyond organisational form and function. These new organisations will also need to consider how they interact with the public sector pensions framework. The answer to this is not always obvious. Indeed, health sector commentators have questioned whether the NHS Pension Scheme will feature at all in the new social enterprises.
To navigate this pensions maze, existing guidance and processes will need to be revisited to ensure that they are capable of adaptation to a wider set of potential public sector businesses.
Commissioning bodies, prospective service providers and pension scheme administrators will need to consider the pension issues that arise when functions are transferred. These include:
• What are the legal requirements?
• What pensions structure does the organisation require?
• What are the pension options?
• What are the financial consequences, both short- and long-term?
• How do all parties manage their pension risks, particularly the risk of employer default?
Resolving these issues will not always be straightforward and will be time-consuming. Addressing them as soon as possible will therefore be essential to achieving a smooth and successful transfer of functions and the success of the Big Society.
Nigel Keogh is the pensions technical manager at CIPFA. For more on CIPFA’s Big Society work, visit www.cipfa.org.uk/bigsociety
