Govt to revoke public sector exit payment regulations

The government has confirmed that regulations around the restriction of public sector exit payments will be revoked in light of concerns that they may have “unintended consequences".

The plans were announced following an “extensive review” of the application of the cap, which concluded that the Restriction of Public Sector Exit Payments Regulations 2020 should be revoked.

The guidance confirmed that HM Treasury (HMT) directions have also been published, which will disapply the cap until the regulations are fully revoked, although these do not apply to exit payments made by a devolved Welsh authority.

The government emphasised “for the avoidance of doubt” however, that is still “vital” that exit payments deliver value for the taxpayer, stating that employers should "always consider whether exit payments are fair and proportionate".

In addition to this, it confirmed that HMT will be bringing forward proposals “at pace” to tackle “unjustified” exit payments.

Individuals who have been directly affected by the cap whilst it was in force, meanwhile, have been urged to request from their former employer the amount they should have received had the cap not been in place.

In turn, employers are then “encouraged” to pay any former employees to whom the cap was applied the additional sums that would have been paid but for the cap.

Hymans Robertson partner, Douglas Green, welcomed the change in plans, emphasising that they will address the situation where local government pension funds (LGPS) were in effect forced to choose which set of regulations to breach.

“We are also glad to see that members will be effectively reimbursed, and that employers are receiving clear instruction to treat such cases as if the cap had not applied," he added.

“It is important to note that LGPS funds will have taken various steps over the past three months to address the £95k cap legislation, and these steps will now require to be readdressed.”

The plans have also been welcomed by Unison general secretary, Christina McAnea, who argued that the change in regulations will represent relief for "millions" of public sector workers.

She stated: “It’s great the government has finally seen sense and stepped back from this damaging regulation that threatened to blight the retirement of millions of workers.

“Through no fault of their own, long-serving staff over the age of 55 and facing redundancy would have been hit by the regulation.

"Because they’re obliged to take their pensions if they lose their jobs, when combined with redundancy payments the final amount could have exceeded the £95,000 cap.

“All along the treasury was told that the regulations were flawed, and they would hit ordinary workers."

Indeed, industry experts previously warned that the proposals could represent a "significant cut" to workers' benefits, with concerns raised over the potentially wide-ranging impact on members.

However, McAnea has argued that the government should now also "abandon" any plans to re-introduce the legislation, stating that it has "wasted much time and money".

“Instead, ministers should concentrate on supporting dedicated public service workers who are delivering for their communities in the most challenging of circumstances," she said.

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