Compulsory bulk transfers of staff

Content

12.1 General

Background
What does broad comparable mean?
What is a bulk transfer?
Who is involved with a bulk transfer?
Public Sector Transfer Club arrangements
Subsequent compulsory transfers
Who should I contact?

12.2 Transfers into the Civil Service

Broad comparability assessment
Bulk transfer of past service
Transferring staff who already have benefits in the Civil Service pension arrangements
Summary of actions
Who should I contact?

12.3 Transfers out of the Civil Service

Broad comparability assessment
Bulk transfer of past service
Summary of actions
Who should I contact?

Annexes

Annex 12A - Form
Annex 12B - Useful addresses

Compulsory transfers of staff

Background

12.1.1 When an individual’s employment is compulsorily transferred to a different employer, many of their terms and conditions of service are protected under the Transfer of Undertaking (Protection of Employment) Regulations 2006 – generally known as ‘TUPE’.

12.1.2 TUPE protects an individual’s redundancy terms (See section 6 Annex 6F paragraph 6h of the EPG), but generally does not cover pensions.

12.1.3 However, the Government has issued non-statutory guidance to cover the pension position of public servants who are compulsorily transferred to a different employer. (This guidance also covers certain former public servants who were previously transferred to a private sector employer.)

12.1.4 The guidance is contained within the Cabinet Office Statement of Practice ‘Staff Transfers in the Public Sector’ – generally referred to as COSOP - (which incorporates HM Treasury’s ‘Staff Transfers from Central Government: A Fair Deal for Staff Pension’ – generally referred to as “Fair Deal”).

12.1.5 Fair Deal outlines how public service employers must handle members’ pension rights when you compulsorily transfer them with their work, either to or from a private contractor or another organisation within the public sector. A compulsory transfer could arise from:

  • a machinery of government change
  • a Public Private Partnership arrangement
  • Private Finance Initiative
  • restructuring
  • privatisation
  • outsourcing
  • contracting-out; or
  • a re-tendering exercise

Please note: you will need to satisfy yourself whether COSOP applies to your particular situation. MyCSP cannot advise you on this.

12.1.6 Staff whose employment is compulsorily transferred from the public sector to independent providers of public services will generally have a right to continued access to relevant public service pension arrangements. These continued access arrangements will replace the current broad comparability and bulk transfer approach under the existing Fair Deal policy.

12.1.7 New organisations created under machinery of government changes may be able to join the CSP arrangements if they are funded by money voted by Parliament (or from the Consolidated Fund), and carry out Civil Service-like work. If you are a government department considering sponsoring an organisation that wishes to join the CSP arrangements, and would like to apply to Cabinet Office, The Pension Schemes Executive on behalf of that organisation please contact Cabinet Office, The Pension Schemes Executive on the email address below Scheme.ManagementExecutive@cabinet-office.gsi.gov.uk

12.1.8 Where the transfer of employment is between two employers who both participate in the Civil Service pension arrangements, you need to follow the action set out in EPG section 6.1.6. In all other cases where COSOP applies to a transfer of staff, it is the responsibility of the employer who initiates this transfer to ensure the COSOP requirements are met. It is essential that you consider the pensions implications at an early stage of planning such a transfer and, if there is any uncertainty, consult Cabinet Office, The Pension Schemes Executive for advice.

12.1.9 There are two basic elements to the COSOP requirements:

  • The new employer must provide arrangements for future pension benefits that are at least broadly comparable to their former public service pension arrangement – the ‘broad comparability’ requirement.
  • The arrangement must allow members to have the option of transferring their accrued pension from the former employer’s pension scheme to the new employer’s pension scheme. Where the former pension scheme provided benefits on a ‘final salary’ basis, members must receive day-for-day service credits in the new employer’s pension scheme (or actuarial equivalent allowing for the differences between the two schemes) – the ‘bulk transfer’ requirement.

12.1.10 If, exceptionally, it is not possible to meet the broad comparability requirement, the employer must ask the Government Actuary’s Department (GAD) to calculate an appropriate level of compensation for affected staff.

Please note: where one or more of the staff being transferred are members of nuvos, it is possible the new employer’s pension scheme will not be able to achieve broad comparability. This is because ‘career average’ schemes like nuvos are still quite uncommon. In such circumstances, you will need to use the compensation option as a fallback. If compensation is found to be appropriate, it will be dependent on age and gender, and set at a level so that groups most disadvantaged by leaving nuvos are adequately compensated (GAD estimate that the typical cost of such a compensation arrangement might be about 4% of the salary of the individuals affected). Generally, any compensation would be paid as a non-pensionable allowance to members, and not directed into a pension savings vehicle. The compensation payments would cease if an individual subsequently moved to a new business unit, or was promoted within the business unit that was transferred.

12.1.11 You are responsible for identifying the pension issues. You will need to work with your local and departmental trades union representatives so that you can identify and address any issues in good time to meet your deadlines. When planning any transfer, you need to take into account the fact that pension issues are complicated and often take a long time to resolve. The transfer may involve costs for yourselves, and you should include these in any business case that you may have to make to your Minister or Accounting Officer.

Back to top

What does ‘broadly comparable’ mean?

12.1.12 GAD certifies schemes as ‘broadly comparable’ where they provide benefits of equivalent value. (Some schemes are pre-certified as broadly comparable to the PCSPS –referred to as having a GAD ‘passport’). This means that the scheme that the members are transferring to provides benefits, net of employee contributions, of equal or greater overall value than those of the current scheme.

12.1.13 You must ask GAD to confirm broad comparability in any compulsory transfer of members and their work either into or out of the CSP arrangements where COSOP applies. GAD will assess the value of the package of benefits offered to the members, together with their structure. GAD will charge you for any work you commission. GAD will compare this package with that offered by the CSP arrangements. GAD looks at the range and level of different benefits provided under the two schemes and considers other issues, such as future safeguards for the transferring of the staff. GAD has published a Statement of Practice (appended to COSOP) which sets out clearly the principles they follow when certifying broad comparability.

12.1.14 GAD provide

  • A formal certificate confirming broad comparability
  • An analysis of the key differences between the schemes
  • An assessment of the ways in which the differences between the schemes balance out.

12.1.15 In addition, in circumstances where broad comparability cannot be met, GAD will advise on an appropriate level of compensation for the affected individuals.

12.1.16 You must contact GAD as soon as you plan to undertake a compulsory transfer.

12.1.17 Where staff are transferring into the CSP arrangements in circumstances in which COSOP applies, the section of the scheme they will join depends on the type of scheme they are coming from. If their former scheme operates on a ‘final salary’ basis, they will join premium (but retaining the pension age from their former scheme if it is higher than 60) or partnership. In all other cases the individuals will have the choice of either nuvos or partnership.

Back to top

What is a bulk transfer?

12.1.17 A bulk transfer is a special arrangement whereby enhanced transfer terms apply where members transfer their pension benefits to the new employer’s scheme and receive benefits of equivalent value. Bulk transfers only apply if the member is transferring ‘final salary’ benefits.

12.1.18 A bulk transfer can be into or out of the CSP arrangements. The bulk transfer usually applies only to a specific event, such as when staff move under a Machinery of Government change. Unless previously agreed with Cabinet Office, The Pension Schemes Executive, a bulk transfer arrangement for one exercise will not automatically apply to another exercise.

12.1.19 Bulk transfers specify the basis for calculating

  • the transfer payment and
  • the credits for past service that the staff should receive in the new employer’s pension scheme

Staff transferring their classic, classic plus or premium benefits under a bulk transfer arrangement will receive day-for-day past service credits in the new employer’s pension scheme (or the actuarial equivalent allowing for the differences between the two schemes).

Separate arrangements apply to nuvos and partnership members. If you think any transfer might cover nuvos and/or partnership members, you should contact MyCSP.

Back to top

Who is involved with a bulk transfer?

12.1.20 Cabinet Office, The Pension Schemes Executive must approve any transfer into or out of the CSP arrangements. This is because they manage the Cabinet Office Civil Superannuation and consequently any money that is paid into or out of the CSP arrangements, as a result of a bulk transfer.

12.1.21 GAD is the scheme actuary for the CSP arrangements. Their contact details are in Annex 12B.

12.1.22 Where you are transferring staff out of the Civil Service pension arrangements to a private contractor’s pension arrangement, GAD (in line with policy guidance from HM Treasury) will advise terms that are generally non-negotiable. For transfers to another public service scheme, GAD will agree terms with the actuary for the other scheme. In either case, GAD will calculate and agree with the other schemes the amount of money that should transfer to or from the Cabinet Office Civil Superannuation.

Please note: If the receiving scheme’s actuary does not agree with GAD’s valuation, it is possible that the contractor will make a price adjustment to their bid to take account of this.

12.1.23 Her Majesty’s Revenue and Customs (HMRC) must give approval before any money transfers between the two pension schemes under a bulk transfer. GAD will obtain HMRC approval on your behalf.

Back to top

Public Sector Transfer Club (the Club) arrangements

12.1.24 The Club arrangements allow members to transfer from one participating scheme to another on advantageous terms. The Club includes the CSP arrangements. However, Club terms do not apply where staff are being transferred with their work between Club schemes. Staff may not elect to take a Club transfer in preference to taking part in the bulk transfer arrangements.

Back to top

Subsequent compulsory transfers

12.1.25 Staff who leave your employment following a compulsory transfer of employment may subsequently find their employment transferred again. To protect their position, you must, when arranging a bulk transfer out of the CSP arrangements, ensure that the contract you agree with the new employer covers the issue of subsequent transfers. The contract must contain clear provisions about the handling of staff pensions in any future transfers.

12.1.26 The contract’s provisions should include an enforceable obligation on the employer and their pension scheme that will allow an onward bulk transfer on terms at least as favourable terms as the initial bulk transfer agreement.

12.1.27 Having a clause of this nature in the contract reduces the risk that you, as the original employer, will have to provide significant extra finance to ensure that staff do not lose accrued service. However, financial and demographic conditions may evolve over the life of a contract. Therefore you cannot reduce the risk entirely and you may still have to provide additional funding

Back to top

Who should I contact?

12.1.28 As soon as you make a decision that will lead to the compulsory transfer of staff with their work requiring a bulk transfer to or from the CSP arrangements, you must contact:

  • MyCSP
  • GAD using the form at Annex 12A

Back to top

Transfers into the Civil Service where COSOP applies - What you need to do

Broad comparability assessment

12.2.1 If you plan to transfer staff and their work into your organisation from another public service employer, as a result of a machinery of government move, you will normally be responsible for ensuring the broad comparability of the pension arrangements.

Please note: consideration is being given to the possibility of staff compulsorily transferred between public services that operate different pension scheme being able to continue as active members of the sending organisation’s scheme. However, until or unless this policy is changed, such transferring staff will continue to join their new employer’s pension scheme.

12.2.2 In addition, COSOP protects the pension position of staff originally transferred from public service employment in TUPE transfers where Fair Deal applied, who have been continuously employed under the contract with a public service contractor.

12.2.3 In both cases, you must ask GAD to assess the broad comparability between the CSP arrangements and the pension scheme that the staff are transferring in from. Generally, if the staff are being transferred compulsorily from employment covered by a final salary pension scheme, they will be allowed to join premium – albeit retaining the pension age from their former scheme if this is higher than 60.

Please note: the special arrangements set out in this chapter do NOT apply to those compulsorily transferred in from a private sector employer who were either:

  • directly recruited by that private sector employer (or a previous private sector contractor, if applicable); or
  • Originally transferred out of the public sector before Fair Deal was introduced

What happens?

12.2.4 You will need to give GAD details of the pension scheme the staff will be transferring from, together with data of the staff expected to transfer employment. GAD will assess and confirm whether the CSP arrangements are broadly comparable to the former scheme. GAD must confirm broad comparability before the business transfer. You will find this assessment useful when you need to discuss issues with staff representatives. GAD will charge you for any work you commission.

Back to top

Bulk transfer of past service

12.2.5 A bulk transfer is necessary when staff compulsorily transfer with their work to an employer who participates in the CSP arrangements, having been a member of a final salary pension scheme with their previous employer.

What happens?

12.2.6 You must engage the scheme actuary GAD, to agree the terms of any bulk transfer arrangement with the transferring scheme’s actuary. GAD will charge for this work. They must reach agreement before any business transfer takes place. If this does not happen, it could result in you having to make additional payments to Cabinet Office Civil Superannuation.

12.2.7 Bulk transfers must meet certain legal requirements. GAD and MyCSP can advise you on some issues but you may also need to consult your legal advisers.

12.2.8 It may not always be possible to secure satisfactory terms that would enable the staff to receive day-for-day past service credits in the CSP arrangements (or actuarial equivalent allowing for the differences between the two schemes). In circumstances where staff have been promised service credits but the payments received for this from the previous scheme are inadequate, you may have to make additional contributions to Cabinet Office Civil Superannuation to meet the shortfall. Any such shortfall payment will normally be a one-off up-front payment and could be very large. You will need to factor this into your business case.

12.2.9 Once the actuaries for the two schemes have agreed the terms for the bulk transfer, the transferring staff must be given the option to transfer their accrued past service into the CSP arrangements. You must give staff a sufficient period of time – usually three months - in which to make their decision. After the end of this period they cannot change their decision although they may still apply for an individual non- Club transfer at a later date. (This is unlikely to be as beneficial as bulk transfer terms.) You must agree with the transferring employer whether you or they will take responsibility for communicating with members and administering the options exercise.

12.2.10 GAD can give you advice on what to include in your communications to members. However, you should include as a minimum:

  • a comparison of the two pension schemes
  • the security of benefits (i.e. the degree to which funds may be at risk)
  • staff’s entitlement to redundancy terms after transfer • bulk transfer terms
  • factors likely to have a bearing on the individual’s choice
  • preservation of pension benefits
  • abatement (for incoming staff who are already in receipt of either PCSPS or CSCS benefits)
  • treatment of AVC funds
  • treatment of Added Years or added pension purchased to date
  • Member’s responsibility to participate in the options exercise and the default option which will apply if individual does not exercise an option
  • confirmation that Club transfer terms will not be available

Both employers (or their advisers) should have the opportunity to comment on member communication.

GAD will charge you for this work.

12.2.11 GAD will confirm that HMRC have granted approval for the bulk transfer.

12.2.12 The transferring scheme’s actuary will calculate the amount to be paid to the CSP arrangements using data compiled by the employer. GAD will agree the amount with the transferring scheme’s actuary and recommend to Cabinet Office, The Pension Schemes Executive that Cabinet Office Civil Superannuation should receive the payment.

12.2.13 GAD will provide MyCSP with details of the service in the CSP arrangements for staff who have transferred in their benefits under the bulk transfer.

Back to top

Transferring staff who already have benefits in the Civil Service pension arrangements

12.2.14 Under review

12.2.15 Under review

Back to top

Summary of action for you

12.2.16 You must:

  • familiarise yourself with the requirements of COSOP
  • give early consideration to the pension issues arising from any proposed transfer and include them in the negotiations on the business transfer. (You must allow sufficient time for this.)
  • await confirmation from Cabinet Office, The Pension Schemes Executive that the transferring staff are eligible to join the CSP arrangements
  • commission GAD to undertake an assessment of broad comparability (unless it is the other employer who is instigating the transfer)
  • liaise with the transferring employer’s pension scheme and arrange to send MyCSP the details of the staff joining the CSP arrangements. (MyCSP will enter these details on staff records through Compendia.)
  • commission GAD to handle the bulk transfer arrangements. They will charge you for this work
  • in conjunction with MyCSP, keep GAD informed about progress at all stages and any potential delays. The whole process may take a long time
  • consult staff representatives throughout the transfer process
  • tell your payroll centre to start paying ASLCs and member contributions to the Cabinet Office Civil Superannuation for new staff as soon as they are on your payroll

Back to top

Who should I contact?

12.2.17 As soon as a decision has been made which would lead to the compulsory transfer of staff with their work into the CSP arrangements, you must contact:

  • GAD – to assess the broad comparability of the two schemes and carry out the bulk transfer work; and
  • MyCSP

Back to top

Transfers out of the Civil Service where COSOP applies - What you need to do

Broad comparability assessment

12.3.1 If the new employer is a private sector contractor they may hold a pre- qualification certificate (also known as a ‘passport’ certificate). This is issued by GAD and certifies that their pension arrangements are broadly comparable to the CSP arrangements. The pre-qualification certificate must be valid at the date that the staff transfer employment. If the new employer has one, ask them for a copy. You should also ask GAD to confirm that the certificate remains valid.

12.3.2 Pre-qualification certificates do not cover staff who are entitled to superior or enhanced benefits within the CSP arrangements. You should ask GAD for a specific assessment for these staff.

12.3.3 If the new employer is a private sector contractor who does not hold a pre- qualification certificate, or if the new employer is another public service organisation, you must ask GAD for a specific assessment for the particular group of staff transferring employment.

What happens?

12.3.4 If an assessment of broad comparability is required, you must provide GAD with information on the new employer’s pension proposals together with data of the staff expected to transfer employment (GAD will specify what information they need). You, or MyCSP, will need to compile this data. It is essential that you give MyCSP early notification of a potential bulk transfer so it can work with you to plan and prepare.

12.3.5 GAD will assess the new employer’s pension scheme and confirm whether it is broadly comparable to the CSP arrangements. You must get this confirmation before the business transfer takes place. GAD will charge you for this work.

Back to top

Bulk transfer of past service

12.3.6 A bulk transfer must be offered to all transferring staff who are currently active members of the final salary sections of the CSP arrangements (i.e. classic, classic plus or premium).

12.3.7 Where one or more of the staff being transferred are currently members of nuvos, it is possible the new employer’s pension scheme will not be able to achieve broad comparability. In such circumstances, you will need to commission GAD to calculate an appropriate level of compensation for the affected individuals.

What happens?

12.3.8 GAD will provide bulk transfer terms. Where the transfer is to the private sector, you must include these terms in the procurement process for the business transfer. Ministers will not approve a business transfer unless there is a contractual commitment to bulk transfer terms. You must therefore commission GAD to deal with bulk transfer terms at an early stage in the procurement process.

12.3.9 Bulk transfers must meet certain legal requirements. GAD and MyCSP can advise you on some issues but you may also need to consult your legal advisers.

12.3.10 Once the terms for the bulk transfer have been agreed and the date of the employment transfer has passed, the transferring staff must have an option to transfer their accrued past service from the CSP arrangements into their new employer’s pension scheme. You must ensure that you provide MyCSP with data (as specified by GAD) on transferring staff promptly and instruct the MyCSP to prepare option packs, obtain GAD’s comments/clearance and issue the packs to transferring staff. The MyCSP must send a copy of the pack as agreed by GAD. You must ensure the staff have a sufficient period of time – usually three months - in which to make their decision and after the end of this period they cannot change their decision.

Please note: if a member does not return a completed option form within the option period, they are treated as having chosen not to take part in the bulk transfer by default.

12.3.11 MyCSP will administer the options exercise on your behalf. It is important that this process is started as quickly as possible after staff have transferred employment. Any delay could create financial problems for members, administrative problems for you and MyCSP and consequent personnel problems.

12.3.12 At the end of the option period MyCSP will compile data on the staff who have opted to transfer their accrued Civil Service pension benefits under the bulk transfer. MyCSP may charge you for this work.

Please note: Normally you will not have to pay anything extra. However if you are transferring more than 100 staff you must speak to your Customer Relationship Manager as MyCSP will charge you for this work.

12.3.13 GAD will obtain HMRC approval for the bulk transfer and will calculate the amount payable to the new employer’s scheme using the data compiled by MyCSP. GAD will agree the amount with the receiving scheme’s actuary and recommend to Cabinet Office, The Pension Schemes Executive that they make payment from Cabinet Office Civil Superannuation to the new employer’s scheme.

12.3.14 The receiving scheme will grant the agreed past service credits in the scheme for those staff who have opted to transfer their benefits under the bulk transfer arrangements. GAD will charge you for this work.

Back to top

Summary of action for you

12.3.15 You must:

  • familiarise yourself with the requirements of COSOP
  • use the form at Annex 12A to commission GAD to handle the bulk transfer arrangements
  • consult staff representatives throughout the transfer process
  • verify that the new employer’s pension proposal is broadly comparable to the CSP arrangements. (You may need to commission GAD to undertake an assessment of the new employer’s pension proposal.)
  • arrange for staff to receive written information before they transfer employment (see paragraph .12.2.10). You may wish to provide presentations. You must keep a record of how and what you have told the staff in case of any later queries. GAD can give you advice on what to include in your communications or you may commission another organisation to do so
  • liaise with the new employer’s pension scheme and, as soon as the employment transfer has taken place, you should send MyCSP the details of the staff being transferred. (Please contact MyCSP for advice on what information they require.)
  • in liaison with MyCSP, you must keep GAD informed about progress at all stages and any potential delays. The whole process may take a long time
  • you must tell your payroll centre to stop paying ASLCs to Cabinet Office Civil Superannuation for staff as soon as they leave your employment

Back to top

Who should I contact?

12.3.16 As soon as a decision has been made which would lead to the compulsory transfer of Civil Service staff with their work requiring a bulk transfer from the CSP arrangements you must contact:

  • GAD, and
  • MyCSP

Back to top