The Franchising Schemes and Enhanced Partnership Schemes (Pension Protection) (England) Regulations 2017

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 franchising scheme or an enhanced partnership scheme.

A franchising scheme is a scheme made under the Transport Act 2000 (“the 2000 Act”) under which a local authority identifies the local services that it considers appropriate to be provided in an area under a local service contract. A local service contract is an agreement where the franchising authority grants an exclusive right to operate the local services to another person in exchange for an undertaking to provide the local services on such terms as may be specified in the agreement.

An enhanced partnership scheme is a scheme made under the 2000 Act under which a local authority specifies the area to which the scheme relates, and imposes requirements in relation to local services by specifying them in the scheme.

The effect of making a franchising scheme or an enhanced partnership scheme may be that certain operators of local services would have to cease providing services. Sections 123X and 138S of the 2000 Act provide 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 obligations imposed on the Secretary of State by sections 123X(9) and 138S(9) of the 2000 Act to ensure that pension protection is secured for transferring original employees (as defined in sections 123X(10) and 138S(10) of the 2000 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, or two or more authorities acting jointly, which have made a scheme. Local service contracts, awarded 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. They must also require the new operator to obtain a pension 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 a Fellow of the Institute and Faculty of Actuaries and that after having regard to certain HM Treasury guidance, in the opinion of that person, the pension rights to be provided by the new operator meet the requirements prescribed in regulation 4. The contact address for the Institute and Faculty of Actuaries is the 7th Floor, Holborn Gate, 326-330 High Holborn, London, WC1V 7PP.

A full impact assessment has not been published for these Regulations. However an assessment has been made of the impact of the Bus Services Act 2017. Copies of that impact assessment may be obtained from the Buses and Taxis Division, Department for Transport, 2/12 Great Minster House, 33 Horseferry Road, London SW1P 4DR or from the Bus Services Act page on gov.uk: https://www.gov.uk/government/publications/bus-services-bill-impact-assessments.

An Explanatory Memorandum is published alongside this instrument on www.legislation.gov.uk.