The Committee considered the report that set out the current position with regard to the Government’s Public Sector Exit Pay Reform.

The Pension Services Manager informed that the Government first announced plans to cap exit payments in the public sector in 2015. Since then HM Treasury launched a consultation in 2019 on draft regulations, guidance and Directions to implement the cap. HMT published its response to the consultation on 21st July 2020.

In September 2020 the Government moved to bring the proposed reforms

before both Houses of Parliament with The Restriction of Public Sector Exit

Payment Regulations 2020 coming into force on 4 November 2020.

With effect from 4 November 2020 the £95k exit payment cap came into force

meaning that the total value of exit payments made to a Local Government

employee who is made redundant or retired early for business efficiency reasons

must not exceed the cap.

The Committee were informed that the problem was that the Restriction of Public Sector Exit Payment Regulations 2020 were in direct conflict with the LGPS Regulations 2013 as you could not restrict payment of benefits of someone who has retired or made redundant due to efficiency savings. 

The Local Government Association had issued guidance to administering

authorities stating that an Administering Authority should without delay set a policy.  There were currently 4 judicial reviews underway. 

Cllr Da Costa said we could not pre-empt the judicial reviews but asked if the proposed policy was in line with current regulations.  For the members we know will be impacted what information would we be giving them so they can consider their options.   In response he was informed that the policy did set followed the exit payment regulations and not the LGPS regulations.  If we continued with current regulations and that got rescinded then we would have to try and get back any payments made.  So we will give them the choice and let them challenge.  With regards to advice there have already been discussions with a number of people facing potential redundancies.  The administrating authorities responsibility is to determine that the correct amount of pension is paid.  We also provide as much advice as we can.  

Cllr Kaiser asked if the responsibility for following the rules was with the administrating authority or the local authority who employs the individual, are local authorities aware of the current situation.  He was informed that employers were aware of the current situation and we would say they can have a full pension but deferred benefit and they can challenge.  If the policy is agreed we will not pay them their full unreduced pension and inform that this is the policy we will follow as the administrating authority.

Cllr Hilton said that the proposal was the most logical you could make under the circumstances and thus we should approve it.

Mr Cross informed that the policy had been emailed to Pension Board members and he also felt it was the most appropriate given the circumstances. 

(Cllr Coppinger had to leave the meeting to attend another council meeting)

Cllr Leake said that there was no realistic alternative to the suggested policy.  It will be resolved one way or the other depending on either the judicial review or change in legislation.  For those affected who have opted for a reduced pension or deferred benefits, when the issue is settled could they claim settlement for what they may be owed.  Should a reserve fund be set up in case this happens. In reply he was informed that if the existing LGPS regulations are retained then they must be back paid any benefits / pension payments.  Employers may wish to put in a reserves for any pension strain costs.

Cllr Da Costa said he agreed with the proposed policy.  Cllr Bond said he also agreed but asked if the employers were aware of the strain cost.  He was informed that they were as this was the first calculation undertaken to asses if they met the £95k cap. 

Resolved unanimously:  that the Committee

i)             Considers the report, attached Administering Authority guidance at Appendix 1 and Secretary of State letter at Appendix 2.

ii)            Agrees to adopt a policy of least financial risk as set out at Appendix 3.