Public sector: cap on exit payments

• The cap applies where an employee ceases to be employed by a public sector authority listed in the schedule to the regulations (a “relevant authority”), or an office holder leaves an office set out in the schedule.  The schedule includes local authorities, the Pensions Regulator, Pension Protection Fund and the Pensions Ombudsman’s office.
• Exit payments include:
  • redundancy payments (other than statutory redundancy payments);
  • early retirement pension without actuarial reduction for early payment;
  • payments in lieu of notice; and
  • severance or ex gratia payments.
• Death in service and incapacity payments are not exit payments for this purpose.

Where an individual is subject to more than one “relevant public sector exit” in a 28 day period, the total exit payments made must not exceed the exit cap. 

Key Dates

The Restriction of Public Sector Exit Payments Regulations 2020/1122 in force on 4 November 2020.

Authored by the pension team