Exit cap information for LGPS employers

Following on from previous announcements on the Government’s Exit Payment Reform, capping public sector exit payments at £95,000, the Restriction of Public Sector Exit Payments (Revocation) Regulations 2021 have been introduced revoking the exit cap.

The Government has stated its intention to bring back the exit cap. In addition, we understand that it still plans to introduce changes to LGPS and Compensation Regulations at the same time as the exit cap is re-introduced. These changes were the subject of a recent MHCLG consultation on reforming local government exit pay. We think changes are unlikely to happen in the next few months due to the time it will take to consult and make changes necessary to legislation. You will need to bear in mind possible future restrictions when undertaking future workforce reforms.

Going forward and until any new regulations come into force, for all redundancy or efficiency cases, the administering authority will revert to its pre November 2020 approach and pay the full unreduced pension benefits to the member and request a strain cost from the scheme employer. You must not make a cash alternative payment to the member nor to the administering authority on behalf of the member.

We advise that you include appropriate warnings when providing employees with information on their potential exit packages. We attach a suggested caveat to accompany your communication to an employee aged 55 or over potentially leaving on redundancy or efficiency grounds.

If you require any further information regarding this, please do not hesitate to contact us at PSSemployers@richmondandwandsworth.gov.uk quoting 'Exit Cap'.

Further information as also been provided by the Local Government Association