The government is set to outsource the processing of civil service pensions to a joint venture.
A combination of private sector organisations and some members of the current administration team will manage the My Civil Service Pension scheme (MyCSP), according to a Cabinet Office announcement.
The government has not yet appointed private sector suppliers. Several firms that offer IT services, including Capita, Northgate and others, are already highly prevalent in the pensions administration sector.
Cabinet Office minister Francis Maude (pictured) branded the move as the "first major spin out" of a central government service.
"Too often there's been a binary choice between the government providing a service itself, or outsourcing it to the private sector. These choices have historically been driven by a belief that services have to be controlled centrally - with a one size fits all approach that has left little room for innovation," he said.
MyCSP will be run as a mutual, with employees taking a stake.