When a council service is outsourced: what happens to your pension

When a council hands a service such as cleaning, catering or grounds work to a contractor, the staff doing it usually move with it under TUPE, keeping their contract terms and length of service. Your LGPS pension has its own rules. The contractor commonly applies to become an admission body so you can stay in the Local Government Pension Scheme, or it offers a broadly comparable scheme instead. The first option keeps your membership going; the second does not.

What TUPE does

GOV.UK describes a service provision change as a service provided in-house, such as cleaning or workplace catering, being awarded to a contractor, a contract ending and being given to a new contractor, or work being brought back in-house. Your employment then transfers, along with your terms and conditions and continuity of employment. Holiday entitlement and collective agreements also transfer. Only employees who can be clearly identified as providing the service are covered.

GOV.UK also says transfers within the public sector are not usually covered by TUPE, though some transfers from the public sector into the private sector are, and public sector employees get similar protection under the Cabinet Office guidance on staff transfers. The general rules and the limits on changing your contract after a transfer are in the TUPE guide.

What happens to your LGPS pension

On pensions, GOV.UK says rights you have earned up to the transfer are protected, but the new employer does not have to continue an identical pension. For local government staff, the LGPS member site gives two possible outcomes.

The first is that the contractor becomes an admission body in the scheme. You can stay in the LGPS as long as you continue to work on delivering the same service. The pension you built up before the transfer is joined to your continuing pension account unless you choose to keep it separate.

The second is that the contractor offers a broadly comparable scheme. The value of the package has to be broadly equivalent to the LGPS, though it need not match it exactly. If you are offered one, your options for your LGPS benefits are the same as for anyone leaving before retirement. That means a deferred pension if you have two years’ membership, or a refund or transfer if you do not. The leaving the LGPS guide explains each route.

Some admission bodies allow only employees whose jobs transferred from a local government employer to join the LGPS, and not their other staff. The joining guide covers admission bodies.

What may change in future

The rules on how contractors take part in the LGPS are set outside this guide and can change. Ask your council or fund whether the position described here is still current for your transfer.

Choosing not to transfer

You can refuse to work for the new employer. GOV.UK says this is treated like resigning, so you would not normally be able to claim unfair dismissal or redundancy pay. You do not need to give notice: you tell your employer, or the new one, before the transfer happens, and your employment ends at the time of transfer. Get advice from your union or ACAS first. If you are thinking of leaving, think through what you would do about your pension, since leaving before retirement has its own options.

Changes to your terms

Before a transfer, the employer generally cannot change your terms to match those of the new company, even if you agree. After it, the new employer cannot change them because of the transfer itself. Employers can improve terms if you agree, for example by raising holiday so everyone has the same. Collective agreements in place before the transfer continue to apply, and GOV.UK says employers can renegotiate them after one year if the change is not less favourable to the employee.

Redundancy after the transfer

TUPE does not stop a dismissal for an economic, technical or organisational reason involving changes in the workforce, such as redundancies, and normal fair dismissal rules still apply. The new employer cannot change your terms because of the transfer itself. If your conditions become significantly worse because of it, you can object or resign and claim unfair dismissal. Redundancy rights and pay are in the redundancy guide.

What to check

During consultation, ask three questions in writing. Which employer will be responsible for your pension, and will it be an admission body? If it offers a broadly comparable scheme, what independent assessment says so? What happens to your pension if the contract ends or moves again? Keep your last payslip and your pension statement before the transfer. A union representative can advise on the terms in your transfer. For legal help, ACAS and Citizens Advice can explain TUPE, and the LGPS fund can explain the pension side.