By Richard Johnstone | 7 January 2014
Reforms to the pension rules for outsourced public sector workers being introduced by the Treasury will lead to more private firms and charities bidding for government contracts, a report has claimed today.
Pensions consultants LCP said the changes to the Fair Deal regulations, set out by ministers last October, would mean that firms previously unwilling to take on the pension provisions of transferring workers would now consider bids.
Under the Fair Deal rules, employers who take on outsourcing deals from central government were previously required to offer transferring staff private pension schemes ‘broadly comparable’ to those they used to pay into.
However, the coalition government concluded the complexity of such arrangements could put off bidders for some outsourcing deals. Therefore, changes have been made to the regulations to allow those compulsorily transferred from the public sector to instead be offered continued access to their public service scheme.
Publishing a new guide for firms on how the changes will work, LCP said this would mean more firms will bid for public sector outsourcing tenders.
Bart Huby, the head of LCP’s public sector outsourcing group said the alteration ‘dramatically reduces pensions risk for contractors and presents many new opportunities for organisations which haven’t previously tendered for this type of work’.
He added: ‘However for this group of new contractors, and for those companies who are already involved in the outsourcing market, there is substantial “devil in the detail” to be considered – such as understanding how pensions costs can develop over the term of the contract and how the cost of redundancies might be met.’
It is estimated the UK public sector outsources around £4bn worth of contracts each year. The deals have recently been under scrutiny after it was revealed in July that Secro and G4S had been overcharging the government for electronic tagging services.
