The following summarises the pension implications for Scheme Employers looking to outsource a function or service.
Below is an overview of direction and other guidance associated with occupational pensions, from the Secretary of State, that should be taken into account during the outsourcing process. However, it is important that Scheme Employers take legal advice as they see fit regarding this complex area.
Sections 101 and 102 of the Local Government Act 2003 confer powers on the Secretary of State to require best value authorities, such as Councils, when engaged in contracting-out exercises, to deal with staff matters (including pensions) in accordance with directions.
The Best Value Authority Staff Transfers (Pensions) Direction 2007 provides that following a transfer of services from a best value authority to a contractor, pension protection must be secured for the transferring employees. Pension protection in this context means pension rights that are the same as or broadly comparable to those that would have been accrued as an employee of the ceding authority. The Direction came into force on 1 October 2007.
One of the ways a successful contractor can secure pension protection for transferring staff is by applying for admitted body status in the Cambridgeshire Fund or Northamptonshire Fund.
Admission body applications
We have developed policies on the manner in which an outsourced service provider can make an application. This application to the Cambridgeshire Fund and Northamptonshire Fund will be for admitted body status, effectively making the outsourced service provider become an employer in our Fund. For further information please refer to the respective fund policy:
Becoming an admitted body means that a contractor is a new employer in the Cambridgeshire Fund or Northamptonshire Fund with an independent employer contribution rate assessed by our Scheme Actuary.
The only exception to this is a streamlined process that may be available for small, short-term contracts (e.g. a handful of staff TUPE’ing with no more than a 3 year contact).
It is important that the Pensions Service are made aware at the earliest possible opportunity of any TUPE that may involve an application for admitted body status.
Also for reading is the Department of Communities and Local Government’s Admitted Body guidance.
Queries on this subject should be directed to the Employers Team.