Exit payment cap update

Publication date: 10/02/2021 10:40:50

On 10 April 2019, HM Treasury (HMT) opened a consultation on draft regulations, directions and guidance to bring in a £95k exit payment cap on public sector exit payments. ‘The Restriction of Public Sector Exit Payments Regulations 2020’, became law on 4 November 2020.

On 22 December 2020, the Association of Local Authority Chief Executives (ALACE) and Lawyers in Local Government (LLG) submitted a joint application and have been granted a judicial review by the High Court. The judicial review is expected to take place in March 2021. We will keep you updated with the progress of this review. 

During this time, any members affected by these regulations, whose total exit payments (including the pensions strain cost) exceed the exit cap, will only have an option to:

  • take a deferred pension,
  • take immediate payment of actuarially reduced LGPS benefits, or
  • pay some or all of the strain cost (above the exit cap) from their own finances and receive either unreduced benefits or benefits with a lower actuarial reduction.

Please contact us immediately if you are undertaking a redundancy exercise and need to request a quotation for pension strain costs. We have recently updated the quotation request spreadsheet which should be completed for bulk quotation requests, the PEN007A leavers form and PEN010 form for individual quotation requests. 

All quotations issued by the pensions team are only issued on the basis that employers have read and understood the exit payment cap caveat warning.