FAQs – Pensions aspects of compulsory transfers of employment
Section B – Transfers into the Civil Service
Q1. What do we need to do about pensions?
A1. If the SoP applies the first step is to commission GAD to undertake the
‘broad comparability’ check and to contact HBW in connection with bulk
transfer terms as soon as the decision is taken to instigate a machinery of
government move, market test etc. See Section 12
of the Employer’s Pension Guide [PDF 173KB]. The
actuaries will charge for their services.
Q2. Can staff joining the Civil Service remain in their previous pension
scheme?
A2. Generally, no. The occupational pension scheme for the majority of
civil servants is the PCSPS. This is a good quality scheme and there should
be no reason for staff to retain membership of their previous scheme once
they have transferred employment. The only exception would be where the
posts concerned would more naturally be covered by an occupational scheme
of one of the professions – typically teachers and medical staff. A
decision to allow staff to remain in their old scheme is likely to produce
severe employment and administration difficulties in the future. Approval
from HM Revenue & Customs may be required. If an employer is
considering permitting staff to remain in their previous scheme, they
should first discuss this with CSPD and reach agreement before the staff
are transferred.
Q3. Which pension scheme can staff join?
A3.Permanent staff are treated as new entrants and so have a choice of
joining either premium or partnership. In only a very few cases, staff may
have the right to join classic – see EPN
25 [PDF 71KB]. But, generally, bulk transfer terms
will only be available for staff joining premium.
Q4. Can we give the transferring staff a choice of either remaining in
their previous employer’s scheme or joining PCSPS?
A4. No, this would permit employees to ‘select against the scheme’. You
must decide, discussing with CSPD as necessary, which scheme will be used.
Q5.Do staff have to complete a medical questionnaire to be admitted to
PCSPS?
A5. If staff are eligible to join their previous employer’s scheme they are
not subject to a PCSPS health check. Automatic entry to the new employer’s
pension scheme is a requirement of broad comparability.
Q6. What happens to an individual who has PCSPS or CSCS benefits in payment
and who is compulsorily transferred back into the Civil Service?
A6. The individual should be neither worse off, nor better off, than they
would have been had there been no transfer. They should be given the option
of either their salary being abated and retaining the right to aggregate,
or waiving both abatement and the right to aggregate. This choice must be
made at the point of transfer and not delayed until pension age.
Q7. What happens if staff are made redundant after transfer?
A7. This can be a difficult area which you should consider carefully,
taking advice from CSPD and/or your legal advisers, before making any
commitments.
In general terms, TUPE protects an individual’s conditions of employment on
transfer, including redundancy terms. An individual is entitled to receive
compensation for the period of employment with both the previous and the
current employer, ie for continuous service. This applies irrespective of
whether or not the member has transferred their benefits in their previous
employer’s pension scheme to the PCSPS. You should establish, at the time
of transfer, the TUPE-protected redundancy terms to which the staff are
entitled. It may be more difficult to respond to a later redundancy
exercise without this information.
When an individual is compulsorily transferred to the Civil Service, the
terms of the Civil Service Compensation Scheme (CSCS) allow an employer to
pay either:
-
redundancy compensation in accordance with the individual’s
‘TUPE-protected’ terms, for their period of continuous service, or
-
CSCS terms based on post-transfer reckonable service only. The member may
elect for whichever is the most beneficial. In calculating CSCS benefits,
it is usual for qualifying service in the previous scheme to be treated
towards qualifying (but not reckonable) service in CSCS to determine the
type of benefit to be paid, but this point should be checked with CSPD.
It is not acceptable for CSCS terms to be paid on the total service with
both employers unless this was agreed pre-transfer.
In cases where redundancy compensation on the previous employer’s terms is
to be paid, you should confirm the administrative process for doing this
with CSPD. However, bear in mind CSPD does not have a detailed knowledge of
redundancy terms offered by non-PCSPS employers.
If a Minister has given an undertaking concerning redundancy terms at the
point of the transfer of employment, those terms may be applied.
The CSCS is the statutory mechanism for the payment of compensation to
civil servants. A proposal to pay redundancy compensation in any other form
could either require HM Treasury approval (see DAO(Gen) 11/05 dated 18
August 2005) or require you to lay a scheme before Parliament.
More detail is provided in EPN
104 [PDF 28KB].
Q8. What if the employer wants to harmonise redundancy terms and conditions
for all staff?
A8. Harmonisation will usually be to CSCS terms but you should take legal
advice to ensure that you are not breaching the TUPE Regulations. You must
talk to CSPD if you want to offer anything other than either CSCS or
TUPE-protected terms.
Q9. Does qualifying service in the previous scheme count as qualifying
service in PCSPS?
A9. Yes. It is a requirement of broad comparability that a member’s
qualifying service in their previous scheme will count as qualifying
service in the new employer’s pension scheme. This is irrespective of
whether or not the individual participates in the bulk transfer.
Q10. Does qualifying service in the previous scheme count as qualifying for
the purposes of CSCS benefits?
A10. Generally yes, but you should consult CSPD.
Q11. Does reckonable service transferred into PCSPS count as reckonable for
the calculation of CSCS benefits?
A11. No. Since 1 April 1997, service transferred into PCSPS does not count
as reckonable for CSCS benefits. It therefore makes no difference to a CSCS
calculation whether or not the member has opted to participate in the bulk
transfer.
Q12. Is an equalisation statement required before a bulk transfer can be
accepted into PCSPS?
A12. No.
Q13. What happens if the previous scheme either cannot, or will not,
provide sufficient funds for staff to receive ‘year for year’ credit in
PCSPS?
A13. There is no legal protection for staffs’ pension position and the
PCSPS will not provide a greater service credit for staff than it receives
funds for. It is your responsibility, and not that of PCSPS, to meet the
requirements of the SoP and Treasury guidance. In cases where the sending
scheme will not (or cannot) provide sufficient funds, you have the
following options:
-
staff are offered a partial credit in PCSPS; or
-
no bulk transfer terms are offered to staff; or
-
you pay the shortfall to PCSPS.
For machinery of government moves, options i and ii are likely to lead to
employee relation issues and would not comply with the SoP. Option iii
might need approval from your expenditure team at HM Treasury. In
considering how to proceed, you should first discuss this with HBW and
CSPD.
Q14. Do staff have to transfer their benefits in the previous scheme to
PCSPS?
A14. No. The staff will have the option of either transferring their
benefits into the PCSPS under the bulk transfer arrangements, or preserving
their benefits in their previous scheme.
Q15. Can an individual participate in the bulk transfer if they are aged 60
(or over)?
A15. Yes.
Q16. Some staff had Permanent Health Insurance (PHI) cover in their
previous employment. What happens on transfer?
A16. CSPD’s understanding is that PHI cover is a TUPE-protected benefit.
However, you should seek legal advice on this. If you are considering
continuing to provide PHI cover, you should discuss the implications of so
doing with CSPD as this benefit may override the ill-health retirement
provisions of the PCSPS. Members cannot receive payments from both schemes.
You will need to ensure that both the individuals concerned, and your APAC,
are aware.
Q17. Some staff being transferred in were previously the subject of a
compulsory transfer out of the Civil Service. Are they entitled to any
different arrangements?
A17. No, for PCSPS purposes they are treated as new entrants. However,
there may be employment issues which arise. You should establish what
agreements, if any, were made when the staff were transferred out to
establish whether there are obligations which might transfer back with
them. See also Q5 in this section.
