Employee rights to participate in an occupational pension scheme
generally fall outside the scope of a TUPE transfer. However, in
1999, the "Fair Deal" policy was introduced for public to
private sector TUPE transfers requiring the new employer to provide
a "broadly comparable" scheme for transferring
In 2013, Fair Deal was amended so that employees transferring
from central government, the NHS or agencies would have to be
provided with continued access to the public sector scheme as an
alternative to the provision of a broadly comparable scheme.
Fair Deal does not apply to local government TUPE
transfers. Instead the Best Value Pensions Direction 2007
required the new employer to either participate in the Local
Government Pension Scheme (LGPS) or provide a
broadly comparable scheme.
The Government is now consulting on extending Fair Deal to the
LGPS. The changes would mean that the transferring employees
would remain in the LGPS and the new employer would be obliged to
become an admission body participating in the LGPS. The
option of providing a broadly comparable scheme – even if the
new employer has a suitable pension scheme already – would no
longer be an option.
Admission agreements are usually supported by a bond or
indemnity to protect the LGPS against the risk of employer
insolvency and the use of these will continue. Also,
amendments to the LGPS Regulations will confirm that an admission
agreement can be backdated (at present the willingness of a local
authority to backdate an admission agreement varies).
At present, if there is a deficit on an employer ceasing to
participate, then there is a requirement for the employer to fund
any deficit. The LGPS Regulations will also be amended to
allow for a return of any surplus on ceasing to participate.
We presume that any surplus return will be subject to 35% tax
deduction – as is currently the case under the Finance Act
2004 – although the consultation does not address this point
However, on re-tenders, where employees have already left the
LGPS for a broadly comparable scheme, there is no requirement for
them to be re-admitted to the LGPS. The consultation suggests
that the new employer could seek admitted body status in the LGPS,
but would not be obliged to do so.
The ability to repay a surplus on an employer ceasing to be an
admitted body will no doubt be welcomed by contractors.
However, it could have the consequence that local authorities will
no longer agree to a cap on contractor contributions to the
The treatment of employees on re-tenders is also inconsistent
with Fair Deal 2013 and, if not changed following the consultation,
could mean there is a still a need for broadly comparable scheme in
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