Return of the £95k cap

The guidance attached to the consultation defines the bodies in scope (Chapter 3) as those classed as ‘Central Government’, which according to the Classification of Public Bodies can be summarised as Central Government Departments and their Arms-Length Bodies (ALBs), Executive Agencies, Non-Departmental Public Bodies, Non Ministerial Departments, and any other non-market bodies controlled and mainly financed by them. 

Some LGPS employers may well be included in the scope as set out. For example academies could be included as they are financed by DfE, something we would hope to confirm at our next Digital Deli: Education Education Education on 30 August.

The £95k limit still includes pension strain cost but the major difference this time is that the approval process applies to the decision of the employer for the exit to happen, not the payment to the employee. Where the £95k limit is exceeded, relevant government departments will need to assess each case to determine whether the exit should be approved, taking into consideration criteria such as whether there is a clear and compelling reason for the exit and whether there are any reasonable alternatives to exit. 

Any exit which gets through the approval process will therefore result in the employee receiving the full amount. However, employers will need to know the strain cost prior to commencing the approval process and there will no doubt be a push for standard strain costs, especially from employers with members in multiple funds.

We are considering our response to this consultation which closes on 17 October and are also seeking to confirm if, how and when DLUHC will follow suit for local authorities.

Our public sector team would be happy to discuss this further, or please do join us at our next Digital Deli where will also cover this topic. Sign up here.

Senior Consultant Jeff Houston contributed to this article.