Govt outlines circumstances for LGPS exit payment cap relaxations

The government has set out a list of circumstances where the cap on the payments that specified public sector bodies make in relation to employees’ exits from the Local Government Pension Scheme (LGPS) can be relaxed.

The Restriction of Public Sector Exit Payments Regulations 2020 imposed a £95,000 cap on the payments LGPS employers could make into the pension scheme to fund early exit terms unless payment was in compliance with the regulations and the waiver process.

The Ministry of Housing, Communities and Local Government (MHCLG) has now published guidance on the circumstances where these regulations must or can be relaxed.

There is mandatory relaxation on the cap where a payment is made as a result of the application of TUPE Regulations or the EU Acquired Rights Directive, where a payment is made to avoid employment tribunal litigation in relation to a complaint that someone has suffered a detriment or been dismissed as a result of whistleblowing or carrying out activities connecting with preventing or reducing risks to health and safety at work, or where a payment is made to avoid employment tribunal litigation in relation to a complaint of discrimination.

The guidance also detailed circumstances where discretionary relaxation may apply.

Local bodies can submit these cases for approval to the government for ministers to decide whether it is necessary or desirable to relax the restrictions.

The grounds where relaxation could be considered included compassionate ground owing to genuine hardship.

This was detailed as exceptional circumstances where an exit payment of £95,000 would lead to genuine hardship.

The other discretionary relaxation circumstances were where it is necessary to exit an individual to give effect to urgent workplace reforms, with the case submitted for this circumstance having to provide “as much detail as possible including a value for money analysis and robust cost savings”, and where a written exit arrangement was agreed before the date the regulations came into force and the exit was delayed to no fault of the employee.

The government noted that employers should not make formal offers to employees nor confirm their last day of service prior to decisions on the relaxation of the restrictions being taken by ministers.

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