On 14 October 2020, the legislation to implement the £95k cap on exit payments in the public sector was signed into law, meaning the new cap will come into force on 4 November 2020.
The cap means that the combined value of: your statutory redundancy pay, enhanced redundancy pay, and the cost to your employer of your ‘pension strain’ (making up your LGPS so that if made redundant after the age of 55 you can take your accrued pension benefits early and unreduced, in line with LGPS scheme provisions), must not exceed 95K.
This is an unjustified and unfair attack on public sector workers, and local government in particular. It won’t just affect higher paid senior managers; it could also have a real impact on many members on moderate salaries but with long service (e.g. £30K per annum with 20 years’ service).
As yet neither the Guidance nor Directions to accompany the regulations have been published. This means it is not clear to employers how they are supposed to put the 95K cap into force! What should councils cut of the package elements, and would it be lawful to do so? The government has not told them and left the matters unresolved!
However, UNISON understands that the cap will apply to all exits which take place on or after 4 November. If you think this affects you, get in touch with us as soon as possible.
But there is worse in the pipeline
However damaging the cap will prove for many members, the Tories are now consulting on additional changes to local government pension, redundancy and severance terms.
The so-called ‘once in a generation’ changes to the 2014 LGPS scheme are now under massive attack and may be substantially undermined.
In short, public sector members of the Local Government Pension Scheme aged 55+ who are made redundant and who would currently automatically receive their unreduced pension early will face a significant cut to their benefits, if changes proposed in the Government’s new exit pay consultation are implemented. This new consultation closes on 9 November.
It is proposed that where the council meets the ‘strain costs’ to the pension fund to allow someone to leave on an unreduced pension, the member would have to forego all or part of their redundancy payments to meet that strain cost. Or a member will have to opt for a reduced pension to receive redundancy payments due to them.
If these changes are agreed following consultation any member made redundant after age 55 from an English council or academy school with unreduced LGPS benefits may not receive part or all of their redundancy and severance payments and will have to pay their pension fund a sum equal to the strain costs to allow them to retire early with no reduction in pension.
So to all intents and purposes they may have to lose some or all of their redundancy pay.
Be in no doubt, this consultation proposal will affect virtually every member made redundant over the age of 55, regardless of salary level or length of service. Members on low and median pay will be hit hard.
Member options in such cases would be to choose which one of the elements they want to give up in whole or in part (currently all provided in full):
- Give up all or part of their redundancy pay if they want full pension paid immediately to meet the strain costs of an unreduced pension, or
- Give up some pension (i.e. the pension is reduced) if they want it paid immediately and also take redundancy pay.
The proposals also introduce an element of choice for members who will be looking for specific advice on complex options on which elements of pension/redundancy pay to forego – advice which neither the union or employer provide. This will leave members with life-changing financial decisions to make for which they will need detailed financial advice, all at the point of being made redundant with all the stress and anxiety that entails.
After the Covid crisis ends there is no doubt most councils will have big budget deficits as a result. West Sussex alone has announced a £44million shortfall in funding for 2021-22. It appears that the government is getting ready for massive redundancies at reduced costs.
The branch will keep you updated. Meanwhile, please write to the Minister using our model letter.