DH opens door to NHS pension for private sector

The Department of Health confirmed to HSJ it had begun issuing legal directions to allow profit-making firms to access the scheme for staff transferred from the NHS.

The approach is being used as an interim solution while the Treasury considers implementation of its Fair Deal policies, it announced last July.

Under the Fair Deal proposals, public sector staff who are moved to the private sector under outsourcing arrangements would be allowed to retain their public sector pensions. The Treasury’s most recent consultation on that proposal closed earlier this month, but it is not clear when it will be implemented.

However, HSJ understands firms are already being given access to the NHS pension scheme by the DH, which has been issuing legal directions to allow companies in.

The department has been able to give hospice and social enterprise staff access to the pension scheme since 1967 under the Superannuation (Miscellaneous Provisions) Act.

Until recently it had not been used for profit-making organisations. When the DH used a direction in March last year to give access to Virgin Care community services in Surrey, the company had to set up a social enterprise called VH Doctors to employ its 2,500 new staff.

However, HSJ understands the DH has changed its policy in recent months. Sources with knowledge of the process estimated up to a dozen firms had already sought access under the new approach.

It means the arrangement developed for the Surrey community services would no longer be necessary.

The change is likely to be welcomed by independent sector providers.

Companies have previously said changing the pension system is essential for creating fair competition for NHS contracts.

Neil Bhan, partner at healthcare lawyers DAC Beachcroft, said: “Opening up the NHS pension scheme to the private sector to such a significant extent is a watershed moment for public sector pension reform.

“It also helps to level the playing field for private sector contractors in competition with NHS providers, which have historically been burdened with much higher pension costs because they have been unable to access the NHS pension scheme. As a consequence, this will undoubtedly promote competition within the NHS market.”

A separate government-led review of access to the pension scheme, which could recommend extending it to independent sector staff who have not transferred from the NHS, is ongoing.

A DH spokesman confirmed it had been giving access to the scheme to private companies.

He added: “Since 1967 the Department of Health has had powers to extend access to some organisations - for example hospices and social enterprises.

“The [separate] access review we are undertaking is about seeing if this should also be the case for other types of organisations delivering NHS clinical services on an NHS standard contract.

“This work is currently under way with [the Treasury] and the review partners - including trade unions and independent sector NHS employers.”