Following a recommendation of the Hutton report on public sector pensions, the government has launched a consultation on Fair Deal.

Fair Deal is a non-statutory policy which applies to staff who are compulsorily transferred under TUPE from a public sector to private sector employer (for example where an in-house service is outsourced). Fair Deal requires the new private sector employer to provide a broadly comparable pension scheme for the transferred staff.

Although not strictly within the remit of the review, Hutton's interim report, published on 7 October 2010, found that as pension liabilities are generally higher in the public sector, Fair Deal "creates a barrier to the plurality of public service provision".

Broadly, the consultation proposes a range of options for future policy:

  • retaining Fair Deal in its current form;
  • retaining a reformed version of Fair Deal;
  • ending Fair Deal altogether.

The consultation closes on 15 June 2011. Further details can be found at: http://www.hm-treasury.gov.uk/d/consult_fair_deal_pensions.pdf

The Hutton Review

The Fair Deal consultation needs to be considered in the light of Hutton's final report, published yesterday. Hutton urges an overhaul of the public sector pension system, in particular recommending that going forward, public sector pensions should be related to career average salaries, and not final salaries. If implemented, Hutton's recommendations would narrow the gap between public sector and private sector pensions – thus to some extent reducing the impact of any reform or abolition of Fair Deal.

The Hutton report also recommends:

  • maintaining the final salary link for past service for members;
  • linking normal pension age to the state pension age including tracking planned increases (except in certain sectors, such as the armed forces, police and fire and rescue);
  • introducing a fixed cost ceiling, so members might need to increase contributions or take a smaller pension; and
  • introducing new UK legislation, so that all public sector pension schemes move towards a common framework.

The Report suggests that it should be possible to achieve these changes by 2015.

The Final Report can be accessed here: http://cdn.hm-treasury.gov.uk/hutton_final_100311.pdf

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