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

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

  • Capping public sector exit payments—pensions implications
  • Which pensions payments are affected by the exit payment cap?
  • Which pension payments are not caught by the cap?
  • Relaxation of cap in exceptional circumstances
  • Pensions impact of the cap
  • Further proposed reforms concerning calculation of exit payments
  • Consequential reforms to the Civil Service Compensation Scheme

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). This will apply to all workers employed by public authorities, not just high earners—for more information, see Practice Note: Capping the size of public sector exit payments (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 more 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 more 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 more information, see: Consequential reforms to the Civil Service Compensation Scheme, below

After a long period of delay, the government launched a third consultation in 2019 which sets out the proposed method of implementing the cap on public sector exit payments, including which bodies should be in scope. Draft regulations implementing the cap (the Restriction of Public Sector Exit Payments Regulations 2019) and a guidance document on these draft