The Quality Contracts Schemes (Pension Protection) Regulations 2009

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations make provision about the pension protection to be provided to certain employees of bus operators who transfer to a new employer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) following the making of a quality contracts scheme.

A quality contracts scheme is a scheme made under the Transport Act 2000 (“the Act”) under which a local transport authority determines the local bus network in the area to which the scheme relates. Where such a scheme is in place, local bus services can only (with some exceptions) be provided under quality contracts. A quality contract is a contract made by the local authority under which a particular operator is granted the exclusive right to operate specified services. The effect of making a scheme may be that certain operators of local services would have to cease providing services. Section 134B of the Act provides for TUPE to apply so that employees transfer to a new employer where their former employer has ceased providing local services in those circumstances. These Regulations fulfil the obligation imposed on the Secretary of State by section 134B(9) of the Act to ensure that pension protection is secured for transferring original employees (as defined in section 134B(10) of the Act) who, as an employee of the original operator, had rights to acquire pension benefits. Such employees are defined in these Regulations as ‘relevant employees’.

Regulation 3 places duties on an authority which has made a scheme. Quality contracts, or other agreements to operate local services related to the making of the scheme, must be made on terms which secure pension protection for all relevant employees, require the new operator to obtain a pensions statement prepared in accordance with regulation 6, and to ensure that all relevant employees receive a copy of the appropriate part of the statement. The contract or agreement must be made on terms which enable relevant employees to take enforcement action against the new operator if the requirements on pension protection and the procurement of the statement are not satisfied.

Regulation 4 provides that the pension benefits which relevant employees have the right to acquire from the new operator must either be the same as, or count as being broadly comparable to, or better than, those enjoyed by the employee whilst employed by the original operator.

Regulation 5 defines the term ‘broadly comparable’ for the purposes of these Regulations. Rights count as being broadly comparable if the employee suffers no material detriment in terms of the pension benefits received. If, in exceptional circumstances, it would not be reasonably practicable to provide such rights, the new employer must instead make arrangements to pay adequate compensation to affected relevant employees to redress any such material detriment.

Regulation 6 prescribes that the pensions statement to be procured by virtue of regulation 3 must be obtained in writing from an appropriately qualified person and must certify that, in the opinion of that person, the pension rights to be provided by the new operator meet the requirements prescribed in regulation 4. An appropriately qualified person includes a Fellow of the Faculty of Actuaries and a Fellow of the Institute of Actuaries. The contact address for the Faculty of Actuaries is Maclaurin House, 18 Dublin Street, Edinburgh, EH1 3PP and that for the Institute of Actuaries is Staple Inn Hall, High Holborn, London, WC1V 7QJ. The person making the statement must certify that in reaching an opinion, to the extent that the principles can be applied, regard has been had to the general principles contained in a statement of practice on broad comparability issued by the Government Actuary on 26th May 1999, and attached to the document issued by Her Majesty’s Treasury in June 1999 entitled “Staff Transfers from Central Government: A Fair Deal for Staff Pensions”. A copy of the document may be obtained from the Correspondence and Enquiry Unit, 2/W1, HM Treasury, 1 Horse Guards Road, London, SW1A 2HQ, and a link may be found at http://www.hm-treasury.gov.uk/tax_pensions_guidance.htm.

An impact assessment has been prepared and copies can be obtained from the Department for Transport, Great Minster House, 76 Marsham Street, London, SW1P 4DR. The assessment is annexed to the Explanatory Memorandum which can be found alongside these Regulations on the Office of Public Sector Information website (www.opsi.gov.uk).