SECTION 3: PENSIONS
3.1 This Section examines the usual obligations which should be included in all Local Authority service Contracts concerning pension arrangements.
3.2 Transferring Local Authority employees will generally be members of the Local Government Pension Scheme (LGPS), although in certain cases, they may be members of other schemes (for example the Teacher's Pension Scheme). This Guidance is drafted on the basis that LGPS will be applicable.
3.3 Whilst TUPE ensures that most employment obligations and rights are transferred to the Contractor, there are certain aspects of occupational pension benefits relating to normal retirement, invalidity and survivors which are not covered by TUPE. However, the Statement of Practice and the Annex to it, "A Fair Deal for Staff Pensions" has sought to bridge this gap in the public sector by requiring that pension provision for public sector employees must be protected in one of two ways:-
3.3.1 by allowing transferring employees to remain within the LGPS; or
3.3.2 by the Contractor offering such employees membership of an alternative scheme which is certified as "broadly comparable" by an actuary.
3.4 The Statement of Practice, referred to in paragraphs 32 and 33 of Circular 03/2003, requires the principles in the Statement of Practice to be followed. These principles require staff transfers to be fair, open, transparent, and involve consultation with staff and their representatives.
3.5 The Direction requires that transferring Local Authority employees must be offered secure pension protection. Further legislation would be helpful to ensure the Direction applies to maintained schools (refer to paragraph 2.10 above). Pension protection is secured if, after transfer, the transferring employee has a right to acquire pension future benefits and those rights are:
(1) the same as; or
(2) broadly comparable to; or
(3) better than
those that the transferring employee had when he was an employee of the Local Authority. Further, the Direction confirms that on second and subsequent generation contracting the Local Authority will ensure pension protection for the original Local Authority transferring employees and so far as the terms of the contract relate to the securing of pension protection for an original transferring employee, that such terms are enforceable by the employee. Protection of accrued pension benefits is provided by the right for those with three or more months' membership in the LGPS (or who have had a transfer of other pension rights into the LGPS) to have a deferred benefit in the LGPS. Additionally, bulk transfer terms may be agreed in respect of those wishing to transfer their pension rights from the LGPS to the Contractor's scheme (see paragraph 3.10 below).
The Authority and Contractor will need to be aware of Beckmann or Martin rights, which might transfer to the Contractor where a TUPE transfer applies.