Newsflash: Fair Deal for NHS pensions

Department of Health publishes ‘New Fair Deal’ guidance

Fair Deal is a non-statutory policy setting out how pension issues are to be dealt with when staff are compulsorily transferred from the public sector to independent sector providers of public services. Under the old Fair Deal, independent providers had to provide broadly comparable pensions for staff who were transferred from the public sector to a non-public sector employer. Under the new Fair Deal, these staff will be entitled to retain membership or eligibility for the public service pension scheme they were in or eligible to join immediately before the transfer. The aim is to remove one of the barriers to independent sector providers delivering public services contracts, thereby encouraging a plurality of public service provision.

HM Treasury published guidance on the new Fair Deal in October 2013 “Fair deal for staff pensions: staff transfers from central government”. The Department of Health has now published guidance about the application of the new Fair Deal to the NHS Pension Scheme (NHSPS) “Fair Deal for staff pensions: staff transfers from central government” (21 March 2014).

Key points from the guidance

  • Employer contribution rates for independent sector contractors (ISCs) will be the same as those for NHS employers (currently 14%). Penalties and interest charges will be imposed for late payment.
  • There will generally be no requirement for ISCs to provide an indemnity, guarantee or bond. Instead, contractual set-off provisions will be used to mitigate the risk of ISCs defaulting on their contributions to the NHSPS. A conditional guarantee might be needed if there is a previous record of default payments by an ISC.
  • Participation agreements will not be required. Instead, NHS Pensions will issue a Pension Direction in respect of staff transferring to an ISC. Failure to comply with the Pension Direction will constitute an event of default, allowing the contracting authority to terminate its contract with the ISC.
  • Employees named in the Pension Direction will be eligible for the NHSPS if their minimum engagement time on the transferred NHS function amounts to more than 50% of their employed time for the ISC.
  • Employees named in the Pensions Direction who cease to work on the transferred NHS function but move to other NHS work for the ISC will remain eligible for the NHSPS on the above basis.
  • Where contracts are retendered that involve staff who transferred under the old Fair Deal, there is a presumption staff will be offered access to the NHSPS and a bulk transfer of accrued rights.

The guidance also sets out the contractual provisions that will be included in NHS commissioning contracts and outsourcing contracts where the new Fair Deal applies. Contact us for advice and guidance regarding the latest pensions announcements.