Of interest to employers who have been party to relevant outsourcing exercises under the old Fair Deal guidance, is the Department of Health’s recently issued guidance on how affected employees can return to the NHS scheme in respect of future service.

In order to start the process to transfer employees back to the NHS scheme for future service, employers must make an application to the Department of Health (DoH) for a Pensions Direction to allow the contractor to participate in the NHS scheme in relation to the transferred staff. Such applications will be considered on a contract-by-contract basis and, in general, participation will not be backdated. Rejoining the NHS scheme will be available only to previously transferred staff, who must also be employed by the contractor at the proposed date of the transfer back. In addition, if the exercise results in a cost saving to the contractor, for example by reduced employer contribution rates, the DoH expects this also to be passed back to the relevant contracting health authority.

The guidance provides that staff should be given the opportunity to request a bulk transfer of their accrued rights from the contractor’s scheme to obtain day-for-day service credits in the NHS scheme, including NHS credits transferred as part of the original outsourcing. However, where eligible employees elect not to transfer their accrued rights, the contracting authority is expected to check whether there are potential section 75 consequences for its own scheme if a rejoining exercise would result in the contractor ceasing to employ any active members, or where a section 75 debt could arise on winding-up.

Employers considering making use of the transfer-back facility should consider the effect on employees, as the terms of the NHS scheme may have changed since the employees’ previous period of membership (for example, there may have been an increase in member contributions). This will be especially relevant if the transfer takes place after April 2015, when major changes to the NHS scheme are scheduled. It is also likely that amendments will be required to the original NHS commissioning contract and the outsourcing contract to reflect the transfer of pension provision back the NHS scheme.

View the DoH guidance.