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Tupe change could widen pension gap

The Government could widen the chasm between private and public sector pensions with rules which give better protection for civil servants.

Under proposals for chan-ges to the transfer of undertakings (protection of employment) legislation, public sector employees in a final-salary scheme who are transferred to the private sector will have to be offered a broadly comparable final-salary scheme. But private staff transferring to another private firm will not get the same level of protection and need only be offered membership of a stakeholder scheme.

First Actuarial director Alan Smith says even if the combined contributions to such a stakeholder scheme were 12 per cent, they would still fall well short of the benefits that a worker would get under their previous DB scheme.

The Government’s mixed messages on contribution levels muddy the waters, says Smith. The Government-appointed employers’ taskforce recommended a combined contribution of 10 to 15 per cent, with employers paying two-thirds but the draft Tupe rules only require employers to pay half this amount.

Smith says: “These proposals will widen the divide between public and ex-public sector workers and their private sector counterparts.”

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