Overview

This briefing by Wragge & Co reports that government plans to use the consumer prices index (CPI) instead of the retail prices index (RPI) for the price indexation of public sector pensions have created uncertainty for public-to-private outsourcing exercises.

The Government Actuary's Department (GAD) has confirmed that it will not issue bulk transfer terms or start new broad comparability testing until the issues arising from the CPI changes have been worked through. This stance could have serious practical implications for many public-to-private outsourcing exercises involving the transfer of staff.

On compulsory transfers of employment from the public sector, broadly speaking, the Government's policy is to provide a level of protection for future pension provision - the so called "Fair Deal".

Employees either transfer to the new employer's scheme or remain within their existing public service pension scheme. If they transfer, employees have the option to request that the benefits they have already built up in the public service pension scheme be transferred to the new employer's pension arrangement by way of a "bulk transfer".

Until the details of how the Government will implement the RPI / CPI changes (which are likely to reduce transfer values), the parties to any outsourcing project involving a bulk transfer should consider the likely impact of the changes with their advisers and each other.

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