We've got a new look! Tenet Education Services and CPL Group have joined the CPC brand! Learn more 

CPC Swoosh

Local Authority Pension Transfers


A Brief Guide For Procurement Managers

DISCLAIMER - This guidance is intended to provide Colleges or Academies with information relating to the transfer of employees (as part of a tender exercise) who are members of a Local Authority Pension Scheme. Colleges or Academies should take their own legal and other relevant professional advice in respect of the specific procurement project to be undertaken. Whilst reasonable endeavours have been made to ensure that the information contained in the guidance is correct as at the date of publication, no warranty, express or implied, is given as to its accuracy. No liability for loss or damage, which may arise from reliance upon any documentation, is accepted, and the use of any of these documents is undertaken entirely at the user’s risk.


In respect of employees who are eligible for membership of the Local Government Pension Scheme (LGPS) the TUPE Regulations only require a new employer to provide as a minimum a defined contribution pension scheme and match employee contributions up to a maximum of 6% when transferring staff to their employment under TUPE. However, the HM Treasury guidance “Fair Deal for staff pensions: staff transfer from central government” issued in October 2013 (Fair Deal) provides additional pension protection when certain public sector bodies transfer employees who are eligible for membership of a public service pension scheme such as the LGPS. Transferring employees must remain eligible for the public service pension scheme that they were a member of or eligible for membership of before transfer. If the relevant public service pension scheme is the LGPS the new employer has to be contractually required to apply for ‘Admitted Body Status’ (ABS) in the LGPS. It is important that the contract for services between the transferor and the new employer contains this contractual requirement as the Fair Deal guidance is not legally overriding, it is guidance only. Obtaining ABS involves the new employer being party to an agreement with the Local Authority (known as an Admission Agreement) to pay pension contributions and accept liability for the funding of the pension benefits in respect of the transferring employees who remain eligible for and actively participate in the LGPS. The Admission Agreement often requires the existing public sector employer (the transferor) to be a party to the agreement.

The Fair Deal guidance is only compulsory for Central Government Departments and Agencies, the NHS, Maintained Schools (except where local authority specific guidance applies), Academies and any other parts of the public sector under the control of Government ministers. It does however state that it is open to contracting authorities in other parts of the public sector to adopt approaches comparable to those set out in the Fair Deal guidance.

Further and Higher Education Institutions are not subject to the Fair Deal guidance and neither are they subject to the Best Value Authorities Staff Transfers (Pensions) Direction 2007, which places a statutory obligation on ‘best value authorities’ to ensure that transferring employees are provided with rights to acquire pension benefits that are the same as, broadly comparable to, or better than those that they had before the transfer. Therefore, the minimum TUPE requirements outlined above will apply in respect of employees transferring from Further and Higher Education Institutions, unless the Further and Higher Education Institution decides to adopt a comparable approach to that set out in the Fair Deal guidance. The rest of this guidance will only apply to a Further or Higher Education Institution if it voluntarily decides to adopt the Fair Deal principles.


Step 1:

If you are tendering a contract that involves a TUPE transfer the first thing to do is to ascertain if any of the staff eligible to transfer are members of the LGPS or a broadly comparable pension scheme. If the incumbent contractor is the Local Authority or if the service is currently being delivered in-house, it is very likely that the staff eligible to transfer will be members of the LGPS. If the services were previously contracted out to a private sector contractor on or after 1999, then the staff eligible to transfer are likely to be in a mixture of pension schemes such as the LGPS or a broadly comparable pension and the independent contractor’s own pension scheme.

Step 2:
If your tender is above the relevant EU threshold and you are conducting your own procurement process, ensure that the requirement for the successful bidder to adhere to the Fair Deal guidance is documented in the OJEU notice and in the Standard Selection Questionnaire. It would be prudent to include a link to where this guidance can be obtained (https://www.gov.uk/government/publications/fair-deal-guidance). It is recommended that all suppliers are asked to confirm their willingness to apply for ABS at the selection stage. It may be advantageous to ask a question about the supplier’s experience of transferring staff who are members of the LGPS, however, this should only be asked if proportionate to the contract and if relevant to assess a bidders capability to perform the contract i.e. if the contract involves a large number of employees who are members of the LGPS. You should always ensure that any questions asked within the Standard Selection Questionnaire are compliant with Regulation 60 of the Public Contracts Regulations 2015 as amended.

Step 3:
Contact the LGPS administrator to inform them of the tender process and the possible transfer of staff and ascertain from them their specific rules and processes in relation to the successful bidder obtaining ABS. Useful information that can be passed onto the bidders includes:

  • An estimate of the actuarial fee that will be charged to the new employer upon application of ABS.
  • The likelihood of the LGPS Fund and the transferee requiring the new employer to obtain a bond, indemnity or guarantee to protect against the insolvency of the contractor.
  • The timeframes involved in obtaining ABS in the LGPS.
  • Any advisory documentation that the LGPS may have for bidders in a tender process.
  • The current employer pension contribution rate.
  • If possible, a draft Admission Agreement and Bond (if applicable)

Step 4:
Ensure the requirements placed on the successful contractor in respect of the transferring employees pension arrangements are documented in the ITT (or mini competition documentation if using a framework agreement) including any supporting information obtained from the LGPS administrators. The guide appended to this note could be provided to bidders for information purposes only, however, it is important that bidders are informed that they must seek their own independent legal advice on this matter.

Ensure the terms and conditions of the subsequent contract between the Academy and the successful contractor includes appropriate terms relating to the pension provision and the need for the contractor to execute an Admission Agreement which will have an effect from the commencement date of the contract.

Step 5:
Ensure the pricing schedule issued for bidders to complete has a section dedicated to costs associated with transferring employees remaining in the LGPS. It is advisable that there is scope for bidders to include a sum for the employer contributions that will be charged to the Academy, a sum for any fees the bidder will have to pay that they intend to charge to the Academy and a sum for any other costs that they intend to pass to the Academy in connection with the provision of LGPS pension benefits. It is recommended that these figures are identified separately within the pricing schedule from the Contract Price. This will allow the evaluator to easily identify whether the pension costs and process for obtaining an Admission Agreement has been adequately considered within the tender response and will provide transparency in costs for the Academy.

The Academy should note that the employer contribution rates at this stage will only be an estimate as the rate will be set by the Fund actuary upon transfer and will not necessarily be the same as the employer contribution rate paid by the existing employer.

Step 6:
Although it is recommended that the cost of transferring LGPS entitlement is shown separately in the pricing schedule, it is advisable to add these costs to the cost of the contract price for the purposes of evaluating the total contract price proposed by each bidder. Some bidders may choose not to pass all of the costs associated with pensions onto the Academy.

Step 7:
Where an Admission Agreement is entered into, at the end of the contract, if there are differences between the actual and expected experience in relation to the value of members’ pension benefits (for example due to larger salary increases, or a decrease in future expected investment returns), then the contractor may be required to pay an additional contribution to meet the additional benefit cost.

The most critical issue is the possibility of deficits arising over the period of the contract. The contract for services typically includes provisions agreed between the contractor and the Academy which, although contractually binding, are separate from the Admission Agreement itself. This may include agreement for the Academy to retain liability for any deficit at the end of the contract, or for the Academy to reimburse any increases in contribution requirements during the contract. It is also important to consider and record in the contract which party should obtain the benefit of any surplus there may be at the end of the contract, particularly if the Academy has agreed to retain liability for any deficit. It is important that any pension terms in the contract for services are very clearly drafted, as it is common for disputes to arise over the exact meaning of such terms when it eventually comes to enforcing them.


It is important to ensure all parities to the tender process are aware of pension arrangements as early as possible in the tender process and seek appropriate legal advice particularly in regard to the Admission Agreement and the pension terms in the contract for services. This will assist in avoiding disgruntled employees, potential confrontation with Trade Unions and additional costs to the Academy as well as ensuring a smooth mobilisation / implementation period.



This article was co-authored by Jo Frost and Weightmans Solicitors (Part of the Legal Services framework).

Related News

Market Insight Summary - September 2022

Here is the latest Market Insight Summary, to provide members with an updated overview on the key issues affecting various markets and any suspected supply delays.

Read more

How to use framework Terms and Conditions

CPC have produced the following guide to assist our members in how to use our framework agreements and advise members to use ‘call-off’ terms where possible

Read more

Mini Competition checklist

CPC understand that procuring goods & services can be daunting, so we have put together a simple checklist to help guide you step by step through your mini-competition process.

Read more