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This eNews Special Feature looks at GAD’s work in some specialist areas relating to staff pensions.

GAD provides support when a public sector body is involved. This includes:

• where a compulsory transfer of employment results in a change of pension scheme for staff
• the impact of the 2015 (or McCloud) remedy on that work
• other specialist staff related advice

In these areas GAD would typically be working with HR professionals from public sector bodies.

Compulsory staff transfers…

GAD supports public sector bodies where:

• there is a compulsory transfer of staff from one employer to another, and
• where those staff are moved from one pension scheme to another

Our involvement helps to protect the value of earned pension benefits. We can also assess whether the new pension scheme is more or less valuable than the old one.

The most common scenario where GAD would assist is where a contractor has historically provided a service on behalf of a public sector body; examples range from patient transfer services for the NHS to an IT services contract for a Civil Service department. Other compulsory staff transfers where GAD might be involved are reorganisations within the public sector, often where a function moves from one department to another.

Compulsory staff transfers typically occur under the Transfer of Undertaking (Protection of Employment) (‘TUPE’) regulations. TUPE provides limited protection for pensions, but where the service is ultimately being provided by the public sector, additional pension requirements (New Fair Deal or Cabinet Office Statement of Practice) usually apply. GAD helps public sector bodies meet these obligations.

…and so much more

GAD’s involvement in compulsory transfers of employment has developed our expertise in performing assessments for individual staff. When combined with our working knowledge of the public service pension schemes, we are a natural choice for various individual pension calculations and assessments. We’re regularly involved in a range of scenarios, including assessment of:

• pension loss where a (former) employee makes a claim against a public sector employer (using the ‘Ogden’ approach)
• redundancy benefits involving pension awards (typically where historic terms have been crystallised)

Case study – HMRC transfer

HMRC engaged GAD to assist them with a ‘New Fair Deal’ bulk transfer exercise covering the transfer of around 50 employees from a private sector pension scheme to the Civil Service pension arrangements as a result of a contract re-let.

The bulk transfer terms proposed by the private sector scheme resulted in a potential pensions shortfall of £1.1m that HMRC would have been liable for. However, the original outsourcing contract included an underpin to the bulk transfer terms on exit. GAD provided advice to HMRC on the actuarial implications of the underpin and briefed HMRC’s lawyers to enable legal advice to be given.

After robust discussions with the private sector employer, HMRC’s interpretation of the contract was accepted. This meant HMRC didn’t have to meet the potential £1.1m shortfall, realising a significant saving for the public purse.

At the end of the exercise, HMRC recently said:

“Excellent turnaround times, good practical advice, very engaging. Advice is clear and well-articulated to enable the customer to understand very difficult at times detail.

“GAD’s experts are very helpful, and they give timely and valuable advice.”

2015 remedy (McCloud)

Most public service pension schemes reformed in April 2015 (2014 for the local government scheme in England and Wales). From this date most staff joined the new reformed schemes. However, those closest to retirement were protected from the impact of the reforms, with transitional arrangements for moving to the reformed schemes that depended on age.

Those protections were later ruled to be age discriminatory - as a result the affected public service pension schemes are taking steps to remedy this age discrimination. The government has laid primary legislation to implement the remedy, however each scheme needs to issue further regulations containing details of how it will apply in that scheme. Scheme administrators may need to collect additional data and administration routines will need to be updated to be able to implement the remedy.

GAD’s assessments of individuals’ pension benefits must reflect the value of the remedy. For that reason, we have had to pause several assessments until scheme administrators are able to provide the information needed for GAD’s calculations. Despite this, many assessments can continue, and GAD is actively progressing where possible. If you would like to know how this applies to a specific staff transfer, please contact us by email or ask your usual GAD contact.

The 2015 remedy is sometimes known as the ‘McCloud’ remedy, named after the judge who brought the original age discrimination claim.

Staff transfers webinar

To help our clients with cases affected by the 2015 remedy, GAD ran a webinar. This covered the impact of the remedy on our assessments relating to compulsory transfers of employment. It was attended by around 30 specialists from key public sector bodies.

The webinar set out the background, described the specific issues and explained which exercises needed to be paused. It also set out the steps needed for assessments to be restarted, along with the potential timeframes.

Despite covering a complex topic, attendees praised the “clear messaging”, “excellent slides” and “very clear, easy to follow presentation”.

Conclusion

GAD has a wealth of experience for pension assessments in relation to small numbers of staff in a public sector context. In these scenarios a ‘one size fits all’ approach isn’t appropriate - GAD’s specialists have the skills and experience to help public sector bodies achieve their aims, across a range of scenarios.

To find out more, check out the various resources on our dedicated staff transfers web page, or contact us by email.

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