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Civil Service Pensions

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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:

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:

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.