Changes to government pension policy will encourage more firms and charities to bid for public sector contracts, according to a business consultancy.
Financial consultancy LCP said new Fair Deal guidance, which came into force in October 2013, would reduce the pension burden on firms and “significantly remove many of the barriers to entry into the important public sector outsourcing market”.
Under the UK Treasury’s guidance – which covers central government, the NHS and certain maintained schools – workers who are transferred to private firms when services are outsourced are able to remain in public sector pension schemes.
Bart Huby, partner and head of LCP’s public sector outsourcing group, said: “The new Fair Deal guidance dramatically reduces the pensions risk for contractors and presents many new opportunities for organisations which haven’t previously tendered for this type of work.
“However, for this group of new contractors, and for those companies who are already involved in the outsourcing market, there is substantial devil in the detail to be considered, such as understanding how pensions costs can develop over the term of the contract and how the cost of redundancies might be met.”
LCP said the UK has the second biggest public sector outsourcing market in the world, with the United States the largest, and contracts worth £4 billion are let each year.