Charity chiefs call on Hutton to remove pension protection

3 Sep 10
Treasury guidance that protects the pensions of employees outsourced from the public sector to the voluntary sector must be changed, third sector leaders have said
By Jaimie Kaffash

3 September 2010

Treasury guidance that protects the pensions of employees outsourced from the public sector to the voluntary sector must be changed, third sector leaders have said.

The Association of ChiefExecutives of Voluntary Organisations yesterday wrote to former Labour Cabinet minister John Hutton, who is heading the government’s review of public sectorpensions, urging him to abolish the ‘Fair Deal’ guidance. This states that any staff transferred with a service outsourced from the public sector are guaranteed a pension equivalent to that received under their previous employer. This is different to the Transfer of Undertakings (Protection of Employment) regulations, which are a legal requirement to protect pay and other benefits, but not pensions.

Acevo claims that this extra burden has ‘excluded many charities from delivering high-quality and more cost-effective services to their beneficiaries’. It says that, unlike the public sector, there is no financial help from the Treasury to provide these pensions. Furthermore, this leads to a ‘two-tier’ workforce, the organisation has said.

The organisation agrees that, as part of Tupe legislation, staff should still be offered a pension that is either ‘defined benefit’ or ‘defined contribution’, with the employer contributing 6% of salary or more.

Acevo chief executive Stephen Bubb said: ‘This government has spoken of their real commitment to opening up the public service market and passion to build a Big Society with charities playing a major role in public service delivery, but this guidance could act as a real barrier to them making their plans a reality.

‘Charity leaders also want a pensions system based on fairness. Staff delivering public services should have access to a decent pension, but not at the expense of public service users, many of whom are extremely vulnerable at a time of public spending cuts. Nor should it be at the expense of other staff working in the same organisations.’

But Rachael Maskell, the Unite union’s national officer for the third sector, told Public Finance: ‘This is not a gold-plated pension that we’re talking about. We are talking about people on low pay getting a pension contribution from their employer and if we look at the auto-enrolment in 2012, employers are going to have to make a contribution. Employers should be making good provision for all their employees so for those that transferred from the public sector, it should not be an issue at all.

‘I am not aware of employers that are trying on purpose to diminish terms of pensions. I think this is more of an attack from Stephen Bubb because he is ideologically driven to see the public sector run by voluntary organisations.’

Aveco head of policy Ralph Michell attended a meeting with Hutton last week. Michell told PF: ‘It was encouraging in that Hutton understands how big an issue this is for third sector organisations and that it is central to review, but he is coming to no conclusions at this stage and that was quite clear.’

He added: ‘Ask any third sector organisation that has considered or does deliver public services and they would tell you this [pensions] was an issue’. Some organisations had decided against bidding for it because of pension costs and liabilities, he said

In response to Unite, he said: ‘We want staff to have good pensions too. But we don’t want some staff to have good pensions at the expense of others or of service users.’

Hutton is due to publish his interim recommendations on public sector pensions before the end of the month.

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