Robin Squire, the further and higher education minister, said: "We shall let a contract only if it would provide better value for money than keeping the Teachers' Superannuation Scheme in the public sector. We expect that any contract would start in the latter part of 1996 . . . A contractor would not be allowed to use data on teachers for purposes other than administering the scheme."
He said staff at the Teachers' Pension Agency, at Darlington, would be guaranteed the same employment rights if they transferred to the contractor - the TPA will be able to make its own bid.
The announcement followed a three-month consultation procedure.
David Blunkett, Labour shadow education secretary, said: "The Government has, as its own figures show, received just three out of 131 submissions in favour of contracting out the Teachers' Pension Agency. It is quite extraordinary they should feel the need to proceed for purely ideological reasons.
"Change is not supported by either the 1.5 million teachers and retired teachers or the 3,500 employers on whose behalf the scheme is operated. "