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4/1/2021 2:37:09 PM

15. Exit payment reforms and your pension

95k Cap regulations revoked - updated March 2021

On 4 November 2020, HM Treasury introduced a limit of £95,000 on the total of all exit payments made to public sector workers leaving on the grounds of redundancy or efficiency retirement. Exit payments include statutory and discretionary redundancy payments, as well as pension strain costs for early payment of pension benefits. The government has now issued regulations to revoke the cap regulations. This means that anyone over 55 leaving after 12 February due to redundancy or business efficiency will not be subject to a cap on exit payments and will receive unreduced pension benefits paid under Regulation 30(7) (LGPS 2013).

Members who were subject to the cap because they left the scheme due to redundancy or business efficiency between 4 November and 12 February will be contacted and provided with unreduced pension benefits.

While the cap is longer in force, the government have confirmed their intention remains to limit exit payments in the public sector, we therefore expect a cap to be in place in the future.


Changes to compensation payments and LGPS regulations

In 2020, the government published a consultation entitled Reforming public sector exit pay. The consultation proposed changes to compensation payments and to the Local Government Pension Scheme (LGPS). The proposals included limiting pay used in the calculation of redundancy compensation and discretionary redundancy payments, as well as giving members the option of deferring payment of pension benefits following redundancy or efficiency retirement. The consultation closed on 9 November 2020.

Since the revocation of the £95k cap, the government has confirmed that they will consult again on further reforms to exit payments before any changes are made.

This page will be updated when we receive any further updates.


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Last updated: 1 April 2021

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