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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