FAQs – Pensions aspects of compulsory transfers of employment
Section A – General
Q1. What is a compulsory transfer of employment?
A1. Any situation where staff are to be transferred, with their work, to
another employer, either out of or into the civil service. This could
follow an outsourcing exercise or a machinery of government move. A
compulsory transfer may be effected by specific legislation. If not, the
employment rights, including redundancy terms, of those being transferred
may be protected by the provisions of the Transfer of Undertaking
(Protection of Employment) Regulations 1981 (as amended) – commonly known
as ‘TUPE’. TUPE excludes pensions but the extent of the exclusion has been
the subject of recent ECJ judgements.
The Transfer of Employment (Pension Protection) Regulations 2005 came into
force on 6 April 2005. Those Regulations will not affect actions taken by
PCSPS employers provided the advice outlined in A2 below is followed.
Q2. How do PCSPS employers find out how to deal with pensions on a
compulsory transfer?
A2. See:
Q3. When does the SoP apply?
A3. The SoP makes clear that it is government policy that the SoP applies
where staff are transferring compulsorily, either to or within the private
sector, and in some cases from the public sector. This must be taken into
account in the consideration of your business case. There may be financial
consequences for you which flow from this. The SoP does not apply where
staff transferred into the public sector from the private sector unless
they were previously covered by SoP protection.
Q4. When should an employer address the question of pensions?
A4. It is important that you address this very early as part of the
consideration of whether or not to market test a service, make a machinery
of government change etc. In almost all cases, the handling of pensions
issues in accordance with the SoP is complicated and can take a long time
to complete. Employers need to be aware of this and allow sufficient time
in their programme.
Q5. What pension arrangements are staff entitled to following a compulsory
transfer of employment?
A5. Broadly speaking, under the terms of the SoP staff are entitled to:
-
Membership of a pension scheme which provides benefits which are ‘broadly
comparable’ to the public service pension scheme which they were in
previously. ‘Broad comparability’ requires an actuarial assessment of the
overall pensions package against the staffs’ former public sector pension
scheme. You must use the Government Actuary’s Department
(GAD)[External website] for this work; and
-
The opportunity to transfer their benefits in their old scheme to the new
scheme on a basis which provides benefits of equivalent value, sometimes
referred to as ‘year for year’. This is called a ‘bulk transfer’. Bulk
transfer terms must be agreed as part of the contract for the business
transfer and so staff cannot be transferred without bulk transfer terms
being in place. The exact payment will be agreed by HBW who must be
commissioned at the very early stages of the project. The bulk transfer
is paid by (or to) PCSPS.
Q6. If both pension schemes are members of the Public Sector Transfer Club
will Club terms apply?
A6. No. Club terms only apply in cases of individual, voluntary transfers
of employment. This is because the Club works on a reciprocal basis, ie the
numbers of transfers paid and accepted by Club schemes are roughly equal.
Transfers which flow from compulsory transfers of employment would upset
that balance.
Q7. Only one individual is being transferred compulsorily. Does the SoP
still apply?
A7. Yes.
