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Glossary of public sector terms

The following are some useful public sector pensions terms:

Abbreviations

DCLG Department for Communities and Local Government
GAD Government Actuary's Department
LGE Local Government Employers
LGPS Local Government Pension Scheme
NHSPS NHS Pension Scheme
PCSPS Principal Civil Service Pension Scheme
PFI Private Finance Initiative
PPP Public Private Partnership
TPS Teachers' Pension Scheme
USS Universities Superannuation Scheme

Terms

Accepted employer – The mechanism under the TPS which allows a private contractor providing services on behalf of or to maintained school or an academy to participate in the TPS, as required under Fair Deal, where the contractor employs teaching staff as a result of the transfer of those services.

Admission agreement - An agreement used to admit an admission body to the LGPS in accordance with the Local Government Pension Scheme Regulations 2013, or to admit a private sector employer to the PCSPS under the revised Fair Deal guidance. Admission agreements in relation to the LGPS will often require the body to provide a bond.

Administering authority - A body which maintains and runs a fund within the LGPS.

Admission body - A body which participates in the LGPS under an admission agreement. This may be (for example) a not-for-profit body, a body with local authority connections, or a private sector employer which employs staff who have been transferred from a local authority employer and who are protected under Fair Deal or the Best Value Direction.

Best Value Direction - The Best Value Authorities Staff Transfers (Pensions) Direction 2007 - The Direction requires best value authorities (which includes English local authorities) to ensure that future pension protection is provided for employees transferring under service contracts let or re-let after 1 October 2007. The authority must ensure that the service provider provides the transferred employees with pension rights that are the same as, broadly comparable to or better than the rights they had before the TUPE transfer. The employees must also have the ability to enforce the rights against the provider under the service contract.

Bond - Often an admission body is required to provide a bond or indemnity from a regulated deposit taker or insurance company to an LGPS fund, to underwrite financial risks to the fund associated with the participation of the admission body in LGPS. It may be possible instead to provide a guarantee from another entity, such as the person which funds or controls the admission body (eg a parent company), or the public sector client to which the admission body is providing services.

Broadly comparable pension scheme - An occupational pension scheme whose benefit structure has been certified, usually by GAD, as being broadly comparable to a public sector pension scheme. Such schemes are commonly provided by private contractors involved in public sector outsourcing contracts. Where a broadly comparable pension scheme has been certified by GAD it may also be known as a GAD passport scheme.

Cost sharing mechanism - The mechanisms adopted by public sector pension schemes designed to ensure that the scheme costs are sustainable for employers, members and taxpayers.

Direction status - The mechanism by which membership of the NHSPS may be extended to those who are not employed by a NHS employer. It used to be the case that NHS pension directions were only granted in respect of charitable organisations and voluntary bodies, but under the revised Fair Deal guidance, access to NHSPS via direction status can normally be obtained by any private sector contractor involved in delivery of services on behalf of or to the NHS.

Fair Deal - The non-statutory guidance issued by HM Treasury in 1999, and updated in 2013, which sets out the pension protection policy that public sector bodies should follow when transferring staff to a private sector employer or a voluntary sector body. Fair Deal is directly addressed to central government departments and agencies, the NHS, maintained schools, academies, and any other parts of the public sector under the direct control of Government ministers where staff are eligible to be members of a public sector pension scheme. However, it is commonly followed across all areas of the public sector, in particular in relation to outsourcing contracts such as PPP and PFI contracts as well as re-lets of such contracts. In broad terms, Fair Deal seeks to protect the pension rights that accrued whilst in public sector employment as well as future pension rights. Future pension rights can be protected by the new employer keeping the staff in the same public sector pension scheme (now generally possible for all schemes) or by providing the employees with access to a broadly comparable pension scheme. See also Best Value Direction for additional requirements for best value authorities.

Function provider status - The mechanism under the TPS which allows a private contractor providing services on behalf of or to a local education authority to participate in the TPS, as required by Fair Deal, where the contractor employs teaching staff as a result of the transfer of those services.

GAD certificate or passport - The certificate provided by GAD that a scheme fulfils the requirements to be a broadly comparable pension scheme. A GAD certified scheme may also be known as a GAD passport scheme.

Local Government Pension Scheme - The LGPS is a funded public sector pension scheme. It is one of the largest pension schemes in the UK. It provides retirement benefits for local authority employees, as well as for the employees of a range of connected employers, including admission bodies.

NHS Pension Scheme - The NHSPS is an unfunded public sector pension scheme for staff employed in the NHS or (through the grant of direction status) in the delivery of NHS services.

Principal Civil Service Pension Scheme - The PCSPS is an unfunded public sector pension scheme for civil servants. There are several historical benefit structures in the scheme depending on when the member joined, including classic, classic plus, premium, partnership and nuvos.

Public sector pension scheme - An occupational pension scheme primarily providing benefits for public sector workers. The rules are set up under statute. Examples include the LGPS, NHSPS, PCSPS and TPS. These are now increasingly referred to as “public service pension schemes”, in line with the Public Service Pensions Act 2013.

Public sector transfer arrangements - The arrangements operated by the public sector transfer club.

Public sector transfer club - The Club is a group of occupational pension schemes that operate in the public sector (not all of which are public sector pension schemes). The Club allows easier movement of staff within the public sector by operating an agreed reciprocal basis for transfer payments.

Rule of 85 - The rule under the LGPS that formerly allowed members of the LGPS to retire at any time between 60 and 65 with an unreduced pension where their age and pensionable service (in whole years) adds up to at least 85. The Rule of 85 was phased out from 1 October 2006 for new members and from 1 April 2008 for existing members, although transitional protections will be in place until 2016.

Teachers' Pension Scheme - The TPS is an unfunded public sector pension scheme for teachers.

Transfer order - Until the changes to Fair Deal in 2013, membership of the NHSPS was generally only available to those employed by an NHS employer. However, where NHS employees transferred to a local authority under a partnership arrangement made under section 75 of the NHS Act 2006, membership of the NHSPS could be extended to those transferred employees by way of a transfer order.