Public sector exit payments – an update | Shropshire County Pension fund

Shropshire County Pension fund

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Public sector exit payments – an update

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The reforms to public sector exit payments is an area which may be of interest to public sector employees who will be affected by the changes. See previous news item Public Sector Exit Payment Cap. The Enterprise Bill which will enforce the cap is currently before Parliament.

Further exit payment reforms

During February, the Government commenced another consultation on making reforms to public sector exit payments.

Amongst the proposals included in the new consultation are the following:

  • Setting the maximum for calculating exit payments at three weeks’ pay per year of service.
  • Capping the maximum number of months’ salary that can be used when calculating redundancy payments to 15 months.
  • Setting a maximum salary for the calculation of exit payments e.g. £80,000.
  • Enabling the amount of lump sum compensation an individual is entitled to receive to be tapered as they get close to the normal pension age or target retirement age of the pension scheme to which they belong, or could belong, in that employment.
  • Reducing or removing employer-funded pension top up payments, and / or increasing the minimum age at which an employee is able to receive an employer funded pension top up.

The consultation closes on 3rd May 2016 and members can read more information here including how to respond.

Exit payment recovery 

Legislation is also due to come into effect from 1st April 2016 where by an individual has to pay back some or all of their total exit payment if they leave with a salary of £80,000 or more and return to the public sector within 12 months of their exit. The new rules mean that if a person leaves a public sector employment after the 1st April 2016 and then re-joins within 12 months of their original exit, they will be covered by the exit payment recovery regulations.

Further updates will be provided on this website once available.

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