The public sector exit payment cap came into force on 4th November 2020 but it was revoked on 12th February 2021.
The public sector exit payment put a limit of £95,000 in value on employer payments on retirement of a member. All Local Government Pension Scheme (LGPS) employers are included, with the exception of higher and further education establishments and private contractors.
Payments in scope of the regulations include:
If a member’s exit payment exceeded the cap, the regulations directed for member’s benefits to be reduced to a point where the exit payments are £95,000. However, under LGPS regulations, benefits for members aged 55 or over are paid without reduction when they have retired due to redundancy or business efficiency. The LGPS regulations have not been amended nor has a consultation been issued regarding a potential change.
It is this conflict in the two sets of legislation that has resulted in the Association of Local Authority Chief Executives / Lawyers, UNISON and GMB / Unite unions requesting a judicial review.
Despite previously giving the view that its regulations override the LGPS regulations, HM Treasury has provided further information in the Restriction of Public Sector Exit Payments: Guidance on the 2020 Regulations, confirming that:
Furthermore, the guidance instructs that the Treasury expects employers to pay the additional sums that would have been paid, had the exit cap not applied in respect of employees who left between 4th November 2020 and 11th February 2021.