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EPN552 – Employers taking over making cash exit payments on 1 January 2019

Audience

  • Pension leads
  • HR Managers
  • Exit / redundancy leads
  • Finance directors and managers
  • Payroll managers
  • All employers

Summary

  • Following the review of the National Insurance Contributions (NICs) Bill the Government has confirmed that it still intends to legislate for reforms to the NICs treatment of termination payments. This has previously been stated to come into force on 6 April 2019.
  • Employers will take over responsibility for making cash payments from 1 January 2019 as previously stated.

Actions

  • You will need to arrange for your payroll or payroll providers to make cash exit payments and deduct income tax from 01 January 2019, and to be prepared to deduct employer National Insurance payments on cash exit payments from 06 April 2019.
  • You should review your current accounting arrangements, and consider any changes that may be required.

Timing

  • Immediate

Detail

EPN 523 detailed that employers would take over making cash exit payments from 01 January 2019. This will enable employers to take over responsibility for making cash exit payments prior to the requirement to deduct employer National Insurance when cash exit payments are in excess of £30,000, which is expected to apply from 06 April 2019.

The scheme’s preference is for employers to be responsible for making cash exit payments regardless of the changes to National Insurance.

The above change in responsibility covers all exit payments including termination exits, efficiency exits, revisions to termination exits and revisions to efficiency exits.

Prior to 1 January 2019, the Scheme Administrator (MyCSP) will continue to pay the exit payments to the members on behalf of employers and will bill the employers in line with the current process.

Process Change

The table below provides a summary of the changes to the exits process after  1 January 2019.

StageAfter 31 December 2018
Exit Scheme Approval and Commercial Agreement No change
Exit Scheme Launch No change
Offer Stage No change
Award Payment As per the current process employers to send completed CDF form’s to the Scheme Administrator (MyCSP), with an Award Control/Master Sheet – no change to existing process.

The Scheme Administrator will process the Compensation Declaration Form (CDF) form based on the chosen options, and notify employers of the final compensation Lump Sum ready for payment via payroll - change to existing process.

If Buy-Out or Added Pension is applicable to the member’s case, the Scheme Administrator will finalise the pension benefits on the chosen basis and bill employers as per the existing process – no change to existing process.

In the above scenario the Scheme Administrator will detail any residual compensation to be paid via payroll where applicable – change to existing process.

If a member is self-funding any element of buy-out/added pension, the Scheme Administrator can only process final pension benefits once the member payment to the Civil Service vote has cleared – no change to existing process.

Please note that members expectation should be managed if the award timelines as detailed by the Scheme Administrator in the F1- Statement of Work cannot be met.
Post award If awards change after the Scheme Administrator has informed the employer of the cost (for example, due to retrospective pay award, new data, etc.) the Scheme Administrator will supply revised cash exit award figures to the employer. It will be the responsibility of the employer to correct the award, including reclaiming any overpayments made.

Process for member funded Added Pension / Buy Out at award stage

Where a member has confirmed on the completed Compensation Declaration Form (CDF) that they are self-funding an element of Added Pension, or to achieve full pension Buy-Out, MyCSP will instruct the member of the value to be paid directly to the Civil Service Vote.

Once the self-funded amount has been paid and cleared through the Civil Service Vote, the Scheme Administrator will finalise the pension benefits and instruct the employer to pay the final values to either the member or Vote.

Next steps

  1. You will need to ensure you are prepared for your payroll or payroll providers to start making cash exit payments from 01 January 2019, including deducting and paying HMRC income tax.
  2. From 06 April 2019, your payroll or payroll providers will also need to deduct employer National Insurance due on cash exit payments and pay them to HMRC (subject to planned HM Treasury legislation).
  3. The Scheme Administrator will contact all employers with exit schemes active on the responsibility transfer date and agree individual support arrangement with each employer. 

If you require support or have further questions, please contact Martin Greaves by calling 01903760325 or emailing Exit.Schemes@mycsp.co.uk

Contacts

If you have a question about the distribution of EPNs or you need to receive them in a different format contact employerpensionnotice@cabinetoffice.gov.uk.

You can find electronic copies of the Employer Pension Guide, all current EPNs and forms on our website.

This notice is for employers and should not be issued to scheme members.

If members have a question about their pension, they can find information on this website or by contacting the Scheme Administrator (MyCSP).

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