Protected persons consultation response ‘increases pension costs and the administrative burden for employers’

The government has this afternoon published its consultation response on a possible statutory override for protected persons regulations. Commenting on the response, Nick Griggs, partner, says:

“The outcome of today’s consultation response is that the statutory override will not apply in relation to protected persons.

“This means that any employers wishing to achieve a cost neutral staff cost before and after the end of contracting out will probably need to negotiate a salary adjustment with relevant staff, rather than applying the same pension adjustment as for other members. This increases administrative burden by adding an extra tranche of benefit accrual, as well as the time and cost of the necessary negotiations.

"Although only a small proportion of private sector pension scheme members are protected persons (around 4%, or 60,000 people) they are concentrated within certain industries and so some employers will have a high proportion of protected persons. For those employers, the issue will further increase the divide between their staff who are protected and those who are not.

“Indeed, the government’s response noted that protected persons already have more generous benefits than even those who remained within public sector schemes.”