The Treasury will consult on removing the requirement for private companies buying out public services to provide comparable pensions to staff.
Its Fair Deal policy, created by Labour in the late 1990s, also requires private companies to make bulk transfer arrangements possible for staff who wish to transfer their public service pension benefits.
The consultation builds on recommendations from the Independent Public Service Pensions Commission's interim report, published last October.
A report by Lord Hutton said the Fair Deal deterred all but the largest private sector companies from bidding for public service contracts because smaller organisations could not afford the subsequent pension liabilities.
Hutton's final report is due on 10 March.
The consultation will close on 15 June.
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