EPN622 - The Revocation of the Restriction of Public Sector Exit Payments Regulations 2020

Audience

  • Pension leads
  • HR managers responsible for exits and exit policy

Summary

  • The Restriction of Public Sector Exit Payments Regulations 2020 (“the 2020 Regulations”), which came into force on 4 November 2020, imposed a cap of £95,000 on the value of exit payments in the public sector.
  • From the 12 February 2021, the cap no longer applies.

Actions

  • If you have capped a payment at £95,000 due to the Regulations being in force since 4 November 2020, you need to contact the civilservicepay@cabinetoffice.gov.uk mailbox and make them aware.

  • You should update any internal member communication documents issued to members to reflect the revocation of this legislation.

Timing

  • Immediate

Detail 

  • On 12 February 2021, HM Treasury announced their intention to revoke the Regulations due to the unintended consequences they may have or had on some employees.

  • The 2020 Regulations came into force on 4 November 2020 and imposed a cap of £95,000 on exit payments, including the following types of exit payment:

1. Exit payments under the Civil Service Compensation Scheme (CSCS);

2. Payment in lieu of notice (PILON) and compensation in lieu of notice (CILON) which exceed a quarter of the amount of annual salary.

The impact on existing and upcoming exit schemes

  • To revoke the 2020 Regulations, HM Treasury laid the Restriction of Public Sector Exit Payments (Revocation) Regulations 2021 (“the 2021 Regulations”) on the 25 February with a coming into force date of the 19 March. In the interim period and whilst the 2020 Regulations are still in force, the cap is disapplied via amended HMT Directions with accompanying guidance. As a result, organisations in scope do not need Chief Secretary of the Treasury (CST) approval for payment of an exit payment in excess of £95,000, but still require Cabinet Office approval.
  • The Cabinet Office £95,000 control process will continue to apply. As such, organisations will still need to seek Cabinet Office Ministerial approval should they wish to make a redundancy payment under the terms of the CSCS in excess of £95,000. 
  • In their communication to departments, Cabinet Office has continually stressed that until such a time that the consultation on the effect of the 2020 Regulations on the CSCS had concluded, departments should continue to operate the existing high value exit process. There should therefore be no instances where a department has applied the cap but should have instead sought Cabinet Office approval to make a payment in excess of £95,000. Despite this, if you are aware of any instances where you or any other organisation covered by the terms of the CSCS have applied a cap in line with the earlier HMT Directions or guidance to either a voluntary exit, voluntary redundancy or compulsory redundancy payment, please get in contact with the civilservicepay@cabinetoffice.gov.uk mailbox as soon as you can with any details of the case. 
  • If you have run a voluntary exit scheme with a hard cap of £95,000 with exits on or after 4 November 2020, you should consider whether you still would have applied this cap if the Regulations had not been in force. If you are not satisfied that you would have applied a hard cap of £95,000 if the Regulations weren’t in force, please get in contact with the civilservicepay@cabinetoffice.gov.uk mailbox as soon as you can with any details of the case.

Contacts

If you require any further assistance on the content of this EPN, please contact: civilservicepay@cabinetoffice.gov.uk

If you have a question about the distribution of EPNs, or would like to receive them in a different format, please contact EPN@MyCSP.co.uk.

You can find electronic copies of the Employer Pension Guide, all current EPNs and forms in the Employer section of the Civil Service Pensions website.

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

Members can find information about their pension by visiting the member's section.

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