Response to consultation on public sector exit payments cap published

The Government has published its response to last year’s consultation on implementing the public sector exit payment cap. With the exception of a quicker roll-out across the public sector, last year’s proposals have not changed significantly. However we do not have an implementation date as yet.

Plans to cap public sector exit payments at £95,000 have been floating around for many years. They were first put forward when David Cameron was Prime Minister and the necessary regulation making powers have been in place since 2016. However, implementation has been repeatedly delayed due to a number of factors, not least the complications surrounding extending the cap to cover the value of enhanced pension benefits, which sometimes form part of a termination package in the public sector.

The outline of the proposals should now be familiar, but here is a quick reminder:

  • The cap will apply across the core public sector, including central and local government and the NHS
  • The cap will extend to contractual entitlements on termination of employment, with the exception of notice pay (capped at 25% of salary) and accrued holiday pay
  • Statutory redundancy payments and payments to compensate for injury or illness (including injury to feelings) will be exempt
  • The value of any entitlement to an unreduced pension on early retirement will also be captured (these benefits ceased to apply in the NHS from March 2015)
  • There are record-keeping and reporting requirements to support the obligation to apply the cap

We won’t have all the final details until the revised regulations are published. Currently there is only a 2019 draft of the regulations, which was published with the consultation last year. However, in the light of the response to consultation, we are not expecting significant changes.

There is no further news on the linked proposals to claw back public sector termination payments where the recipient gets a new public sector job within a defined time-frame. However, the response to consultation includes this statement:

 “The government remains committed to ensuring exit payments can be recovered when high-paid public servants move between jobs and will take forward further regulations in due course.”

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