Charity leaders have urged the government to scrap pension rules for outsourced workers they say will bar people from getting the best deal from public services.

Association of Chief Executives of Voluntary Organisations chief executive Stephen Bubb has outlined his concerns in a letter to Lord John Hutton, who is leading a review into public sector pensions.

The letter criticises Treasury rules stating that when a service is outsourced from the public sector, transferred staff are guaranteed an equivalent pension.

It says: “The current arrangements for public sector pensions…constitute a barrier to realising a key strand of government policy, a barrier to realising the aspirations of many voluntary sector leaders, and ultimately a barrier to enabling those who depend on our public services to get the best possible deal.”

While laws protecting transferring public sector staff should remain stay, the Treasury “fair deal” guidance “distorts the market disproportionately,” the letter says.

It also “effectively ensures that one segment of the public service workforce receives the best available pensions at the expense both of the people who rely on public services and of other staff who provide them.”

Instead, providers of public services should be free to provide pensions they wish to or are able to make available, with a minimum level for transferees as defined in TUPE legislation.

The organisation was instrumental in securing a review of the former government’s “preferred provider” policy, which has been reversed by health secretary Andrew Lansley.