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£95,000 cap on public sector exit payments revoked

The Public Sector Exit Payments Regulations 2020, which place a £95,000 cap on public sector exit payments, have been revoked.

These regulations came into force on 4 November 2020. After only four months, on 12 February 2021, the Treasury announced that after an ‘extensive review of the application of the cap, the government has concluded that the cap may have had unintended consequences’ and that they are to be revoked. The regulations had come in for some trenchant criticism and unions were seeking a judicial review on the basis that the regulations had significant pension implications, in particular for long-serving public sector workers facing redundancy. A Treasury Direction has suspended them while the formal revocation process takes place. This has now been effected by amending regulations.

Accompanying guidance states that any employee who was affected by the cap while it was in force should request the amount he or she would have received had the cap not been in place by contacting his or her former employer directly. Employers are encouraged to pay to any former employees to whom the cap was applied the additional sums that would have been paid but for the cap. The guidance does also state that ‘HM Treasury will bring forward proposals at pace to tackle unjustified exit payments’.