Fair Deal rules governing the pensions of public sector workers who transfer to the voluntary sector must change if charities are to provide significant levels of public services, umbrella bodies have warned.
A consultation on the Fair Deal policy, which says that when charities take on public sector workers they must offer those workers pensions that are "broadly comparable" to those they previously received, closed yesterday.
Responses to the consultation from the chief executives body Acevo and the Charity Finance Directors' Group, claim the legislation is complex, bureaucratic and unfair. They recommend that charities be permitted to offer simpler and less risky pensions under the policy.
Acevo's response, which will be published on its website, says the existing legislation requires charities to take on "unpredictable, unclear or unknowable liabilities" that present so much risk that many organisations are deterred from bidding for contracts.
It also says there should be "mechanisms to enable comparability during commissioning" because bids to provide services from within the public sector do not include the cost of covering pensions, and look artificially cheap compared with third sector bids.
The CFDG response says almost half of its members that are considering public service delivery said they had been deterred by the risks associated with taking on pension liabilities.
The existing policy also creates a two-tier system, it says, in which employees who transfer from public bodies have better pensions than those operating in-house, which has a divisive effect and lowers staff morale.
The two-tier system creates significant complexity for charities that have to manage two very different pensions propositions, it says.
Charities should have a "pass-through" arrangement that allows them to offer defined-benefit pensions without taking on any historic pensions liabilities associated with particular employees, the CFDG response says.
"The current arrangements are simply not working," said Caron Bradshaw, chief executive of the CFDG. "It is essential that government listens to the calls of the sector and changes the Fair Deal. Without doing so, its vision of increased plurality of public service provision will not come to fruition."