NHS Pensions Scheme opens its doors to the private sector

While the detail of the Government’s policy on reforms to “Fair Deal” is still awaited, it appears that the Department of Health, in an interim move, is already considering applications from private “for-profit” organisations, bidding to provide NHS services, for access to the NHS Pension Scheme (NHSPS). This comes ahead of announcements expected later this year where the Government is set to expand on proposals put forward last July and significantly widen eligibility criteria for employer participation in the NHSPS, thereby opening up access to a scheme which has long been outside the reach of many organisations wishing to bid for health sector outsourcing contracts. Although the granting of access to the NHSPS will be at the Department of Health’s discretion, we understand that a number of private sector bodies are already in discussions with regard to securing access.

Indications are that the Department of Health has already begun issuing legal “directions” to private sector “for-profit” organisations in a move that will see staff transferred out from the NHS being able to retain their membership of the NHSPS despite being employed in the private sector. Until now, “for-profit” organisations have been prevented from participating in the NHSPS in respect of staff they acquire through outsourcings on the basis that the Department of Health has insisted that only not-for-profit organisations who qualify for “Direction Body” status are allowed access to the NHSPS. For a number of years, this has resulted in “for-profit” organisations having to satisfy the stringent requirements of Fair Deal policy imposed on them by outsourcing authorities requiring them to set up separate “broadly comparable” pension schemes for employees transferring to them from an NHS employer. Not only has this often proved expensive and complex to administer, but it has often been seen as disproportionate in the context of the contract awards and has often deterred private contractors from bidding for public sector contracts or resulted in submission of uncompetitive bids. It has also led to complaints of an uneven playing field when bidding against a party able to secure “Direction Body” status. Reform to the existing system has often been seen as essential for creating fairer competition in the bidding process for NHS contracts.

Further detail is likely to emerge in the coming weeks, but the move by the Department of Health is likely to be welcomed and will have a significant impact on the NHS outsourcing market. The position with regard to existing outsourced staff is unclear at this stage, however it is expected that the policy change will simplify pension arrangements significantly with regards to NHS staff transferred to the private sector in the future.