Obtaining information for a tender

TUPE pension uncertainty on tendering for a contract.

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A client charity wishes to enter a competitive tender for an existing service run by an organisation which has one member of staff with an estimated length of service of 20 -25 years and who on retirement will be the beneficiary of a Local Government Pension Scheme (LGPS) pension, for which, under the TUPE legislation, the charity would be liable if its tender were successful. The exact terms of the LGPS and the employee's length of service are not known, under data protection are confidential and will only be released to the successful bidder. The charity does not wish to  fly blind into a commitment which it has no means of quantifying and so is faced with being unable to tender, since to tender and then withdraw should the commitment prove unduly onerous would involve unacceptable reputational loss. I have heard of one solution being the creation of a bond which could indemnify the charity but this seems a tortuous route for one potential employee. Has anyone any more relevant experience, please?

Replies (12)

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By Bobbo
20th Jul 2021 10:57

Can you look at the published financial statements of the existing provider to see if there is any disclosure or quantification of pension liabilities?

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Replying to Bobbo:
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By David Ex
20th Jul 2021 11:25

Bobbo wrote:

Can you look at the published financial statements of the existing provider to see if there is any disclosure or quantification of pension liabilities?

Doubt that would give sufficient detail to quantify what would be, in any event, only an estimate in respect of one scheme member.

https://commonslibrary.parliament.uk/research-briefings/cbp-7684/

The only TUPE arrangement I was ever involved in saw the transferring members lose their ongoing membership of the Defined Benefit scheme to become deferred members. I’m not sure how that affects the potential liability under S75.

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By David Ex
20th Jul 2021 11:27

mayow wrote:

I have heard of one solution being the creation of a bond which could indemnify the charity

Who would provide the indemnity? The transferring organisation? If so, that would seem the best bet for the charity - assuming the transferor is creditworthy.

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By mayow
20th Jul 2021 11:36

Thanks to Bobbo and David Ex. I'll try the published info route, as a long shot. The bond of which I'd heard previously was provided via a high street bank. Presumably like the duty bond for a bonded warehouse

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Replying to mayow:
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By David Ex
20th Jul 2021 11:39

mayow wrote:

The bond of which I'd heard previously was provided via a high street bank. Presumably like the duty bond for a bonded warehouse

The bank would, presumably, need to do some detailed work to establish the liability it was taking on and/or charge a large fee/premium to take on the risk.

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By mayow
20th Jul 2021 11:46

David Ex
You're undoubtedly right. I'm also talking to a couple of pension providers, but as you see, my imagination is running out!

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Replying to mayow:
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By David Ex
20th Jul 2021 11:55

mayow wrote:

David Ex
You're undoubtedly right. I'm also talking to a couple of pension providers, but as you see, my imagination is running out!

I can’t imagine that the cost, effort and risk are worth it for a “one man” operation.

Indemnity from the transferor looks like the best best for the charity.

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Replying to David Ex:
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By mayow
20th Jul 2021 12:05

Which is unlikely. My fault as I probably meant more a sum set aside to cover should the liability crystallise, so effectively an insurance. Thank for your ideas, will plough on.

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By Hugo Fair
20th Jul 2021 13:17

1. LGPS is a DB scheme, so the direct liability is held by a regional fund manager (not the employer).
2. However, independent actuaries set the ER contribution rate (for each fund not per individual employer) every 3 years ... and this is currently very high (between 15% - 25% of employee pensionable earnings I believe).
3. The charity may or may not be entitled to 'use' LGPS, as membership is restricted to staff employed within certain areas of the public sector.

So the main question you need answering relates to whether or not you can TUPE the employee's membership within LGPS (or only to some comparable scheme - which would be a nightmare given the range of LGPS benefits)?
Followed, if you can, by establishing which of the many (over 80 at the last count) of the LGPS funds is in play - and what the ER contribution rate is for that fund?

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By mayow
20th Jul 2021 13:27

Thank you, Hugo. Some detailed information for which I am most grateful. I'll go back to the charity and see whether in the face of what you have explained, the proposed service commissioners can be a bit more liberal with their information, to enable some estimate of risk to be made.

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By paul.benny
20th Jul 2021 13:37

The local authority are being unreasonable (and probably just dumb). Unless there is an indemnity or some other similar provision, who is going to take on a large unquantified liability.

The terms of the LGPS are, I would imagine, public; salary (not mentioned) and length of services fall surely under the legitimate interest exceptions of GDPR. Without that information, no-one can properly cost the pension obligation to make their bid.

Unless there is an indemnity in place or some other provision, no-one can properly cost the

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By mayow
20th Jul 2021 14:01

More thanks, this time to Paul, and I have suggested to the charity that they use Hugo's information to get the other party to reveal a bit more. Good point about the GDPR exceptions, Paul, and I will get them to use that.

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