The below Parliamentary question was asked by Kevin Brennan on 2016-01-28.
To ask Mr Chancellor of the Exchequer, whether it is his policy that a lump sum paid by a public sector employer to an employee’s pension fund to compensate the scheme for having to pay a reduced pension earlier than expected should be used as part of the calculation for the public sector exit payment cap proposed in the Enterprise Bill.
Greg Hands
The Government consulted on implementing a public sector exit payment cap in July 2015. The Government response to this consultation was published on 16 September 2015. This response provides detail on which organisations and types of payments the Government intends to capture within the scope of the public sector exit payment cap. This accords with the Government’s manifesto commitment to end tax payer funded six figure payoffs for public sector workers.
The response document can be found at the following link: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/464367/Public_sector_exit_payments_response.pdf
The exit payment cap will apply to payments made as a result of an employee leaving their employment. It will not affect any pension a person has earned through their years of service or have any impact on accrued pension rights or pension lump sum entitlements on retirement. It will capture contributions, made by the employer, to fund early access to an unreduced or partially reduced pension. This is because such costs are ultimately funded by the tax payer.
The Government has been clear that early retirements relating to ill health are outside the scope of the cap and will not be affected. Additionally, any payments directed by a Court or Tribunal will not be included in the scope of the cap.
Exits on compassionate grounds are not such a clearly defined concept as exits related to ill health or redundancy. There will generally be a large degree of employer discretion on the terms of such exits, and on any payments. In these cases there will be discretion available to relax the cap in individual cases, subject to relevant Ministerial or local council approval, as will be set out in further detail in forthcoming Treasury guidance and directions.
