Capping public sector exit payments—pensions implications
Capping public sector exit payments—pensions implications

The following Pensions practice note provides comprehensive and up to date legal information covering:

  • Capping public sector exit payments—pensions implications
  • Revocation of the Exit Payment Regulations
  • Which pensions payments were affected by the Exit Payment Regulations?
  • Which pension payments were not caught by the cap under the Exit Payment Regulations?
  • Relaxation of cap in exceptional circumstances under the Exit Payment Regulations
  • Application to the LGPS
  • Concerns in relation to the Exit Payment Regulations
  • Impact on modest earners with long service
  • Impact on discrimination law
  • Impact on rules of public sector pension schemes
  • More...

Following two periods of consultation (the first in 2015 and the second in 2016), the government decided to:

  1. cap the value of public sector exit payments to £95,000 (before tax) in respect of all workers employed by public authorities, not just high earners—for further information, see Practice Note: Capping the size of public sector exit payments—the revoked 2020 regulations (subscription dependent)

  2. require higher paid workers to repay their termination payments if they return to the public sector in any capacity (whether as an employee or self-employed) within a year—for further information, see Practice Note: Claw-back of public sector exit payments (subscription dependent)

  3. achieve greater consistency across the public sector by asking each government department responsible for a particular workforce to agree reforms to their exit payment arrangements so as to reflect a set framework of caps and limits—for further information, see: Further proposed reforms concerning calculation of exit payments below, and

  4. amend the Civil Service Compensation Scheme (CSCS) so as to reflect the above reforms—for further information, see: Consequential reforms to the Civil Service Compensation Scheme, below

Following a third consultation in 2019 about the proposed method of implementing the cap on public sector exit payments, the government passed the Restriction of Public Sector Exit Payments Regulations 2020, SI 2020/1122 (the Exit Payment Regulations), which came into force on 4 November 2020 to cap public sector exit payments to £95,000. These regulations were accompanied by

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