New pension arrangements are a Fair Deal for all

I’m Peter Webster, chief executive of Corps Security, and this is where I examine the issues affecting the security industry. My thoughts and opinions are intended to generate debate and whether you agree or disagree with them, you’re welcome to post your comments below.

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Those of you who are regular readers of my blogs will be well aware that I have voiced some serious concerns about the government’s existing procurement policy as well as its now aborted plans to abolish the service provision change (SPC) element of The Transfer of Undertakings (Protection of Employment) Regulations (TUPE). When it comes to these issues it seems to me that in the past the powers that be are not working in the best interests of the many small to medium sized enterprises (SMEs) that operate in the security sector.

I was therefore pleasantly surprised about the content of the revised Fair Deal for Staff Pensions, which came into effect in October. I think that it will go a long way in creating a more level playing field for SMEs and allow them to tender for the type of contracts that only those with serious financial muscle have previously been able to consider.

Let me explain why. The new Fair Deal states that individuals whose employment is compulsorily transferred from the public sector to independent providers of public services via TUPE will be able to maintain their public service pension arrangements. These new first generation continued access arrangements replace the ‘broad comparability’ policy, whereby the company that won a contract would have to set up a pension scheme similar to the one that transferees had previously enjoyed. What’s more they would also have to endure the rather onerous process of having it authorised by the Government Actuary’s Department (GAD).

Although Corps Security is a reasonably large operation, even for a company like us the financial and administrative implications of implementing a broadly comparable scheme made competing for some contracts prohibitive due to the significantly increased cost risks. Therefore, we have had to sit by and watch as outsourcing opportunities have been restricted to larger companies with more resources.

If we examine the figures it’s not difficult to understand how restrictive the previous situation was. For example, companies that now have to auto-enrol employees into a pension scheme have to charge customers an extra one per cent, yet the cost of putting a scheme in place that is broadly comparable to the public sector and administering it would have seen this figure rise to around a staggering 30 per cent. Quite simply it was commercially too risky for SME’s to do and although the pension arrangements were not mandatory, the consequences of not doing so, in terms of industrial unrest and damage to reputation, meant that it was just as effective as legislation.

However, under the new system everyone benefits. Security providers simply pay the employer contribution part of the pension – something that can be instigated with very little bureaucracy involved. Just as importantly, employees get to keep their valuable public sector pensions – which generally offer more favourable returns than private sector variants and are more secure.

Any transferred staff will continue to be members of their public service pension schemes as long as they remain continuously employed as part of the outsourced service and should also continue to be eligible following any subsequent compulsory transfer. What’s more any employees that were eligible to be members of the public service scheme before transfer but were not active members should be eligible to join the scheme post-transfer, as long as they are enrolled back into the scheme on the day the new employment begins.

So far, so good, and unless you are one of the larger security services companies it’s hard to see a downside to the new arrangements – and believe me I’ve tried. This brings me on to what I consider to be the most positive element of the new guidance, which is the increased competition that it will bring by giving the green light to a much broader spectrum of contractors.

For far too long certain contracts have been seen as the exclusive domain of just a handful of companies. This lack of competition has led to what can only be described a series of humiliating failures – exemplified by the well documented problems surrounding the security arrangements at London 2012 Olympic and Paralympic Games. In the year or so since the event nobody has been able to explain to my satisfaction why a syndicated arrangement that allowed a number of companies to operate together wasn’t put in place from the beginning.

Perhaps it is this type of situation – and the need to avoid any repeats – that has finally woken the government up to the risks associated with reduced levels of competition in security provision. If this is the case then it should be applauded for its response with the revised Fair Deal for Staff Pensions, as it marks a significant step forward in helping SMEs bid for public sector work in first generation TUPE cases.

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