1. From 6 April 2018, employer (but not employee) National Insurance payments will be due on termination payments over £30,000 (including Voluntary Exit, Voluntary Redundancy, Compulsory Redundancy and inefficiency payments).
This is a change made by HM Treasury following the Finance Act 2017 and applies to all employers, not just Civil Service employers.
2. Any pension payment, for example Added Pension or buy-out of early access actuarial reduction, counts as a pension payment rather than a termination payment and does not count toward the £30,000 threshold.
Where pension payments are involved, for example Added Pension or pension buy-out, the procedures currently in place will continue.
The Scheme Administrator will continue to produce quotes of member exit entitlement but from 6 April 2018 employers will become responsible for making all cash exit payments, both under and over £30,000.
Whether or not a payment is liable for employer National Insurance will depend on when the payment is made. It is not related to last day of service or when the payment was due.
The principle will be that schemes with employee exits occurring before and after 6 April 2018 will treat all members in the same way. Therefore, the employer will make all payments, even those occurring before 6 April 2018.
However, there will be cases where this approach may have to be different. If you expect to have a scheme with exits before and after 6 April 2018, you should contact the Scheme Administrator using the contact details below to discuss your scheme.
4. Financial considerations
You may wish to review planned exit dates around 6 April 2018 to ensure they do not incur unnecessary, additional cost due to employer National Insurance payments being due on exits on or after 6 April 2018.
Although any additional administrative costs will be for individual employers to fund, the savings Civil Service Pensions will make by not administrating exit payments will be reflected in the overall employer pension contribution rate.
5. Next steps
You should prepare for your payroll to take over paying all cash exit payments, income tax and employer National Insurance contributions associated with exit payments over £30,000 to HMRC before 6 April 2018.
We will publish further information about the change, including roles, responsibilities and guidance regarding information sharing between employers and the Scheme Administrator in due course.
If you need to speak to the Scheme Administrator about your exit scheme please contact firstname.lastname@example.org
For Cabinet Office approval of new or revised VE schemes, in the usual way please contact email@example.com
If you have a question about the distribution of EPNs, contact firstname.lastname@example.org.
This notice is for employers and should not be issued to scheme members.