Comment on Exit Payment Reform Consultation
11 Nov 2020
Commenting on the Exit Payment Reform Consultation in the midst of much confusion and uncertainty, Ian Colvin, Head of LGPS benefit consultancy, Hymans Robertson says:
"We accept that Government has the power to amend LGPS benefits, and had flagged up in last year’s General Election that a £95k exit payment cap would be brought in. However, there are a number of clear and widespread concerns which remain forefront in our mind. Firstly, the manner of communication of the various reform proposals have demonstrated a lack of joined-up thinking in Government. It is extremely disappointing that the £95k cap has been brought into place before the wider reform consultation has concluded, disregarding responses to that consultation even before they have been submitted to MHCLG.
"LGPS Funds are in an impossible position right now, with the collision of existing LGPS Regulations and the new £95k Regulations. Funds are in effect forced to choose which laws to break whenever someone is made redundant from a council or academy school and the value of the pension strain exceeds the cap. It is not clear that the imposition of the £95k cap in the LGPS will be allowed to stand until the wider reforms take effect. The absence of MHCLG guidance or standardisation of approach means that there is inconsistency over how pension strain is measured between funds. This introduces a postcode lottery, where a member in one fund may be caught by the cap but an identical member in the neighbouring fund will avoid it.
"Turning to the wider reform proposals, the inclusion of the statutory redundancy payment is punitive to the lowest paid, for whom the payment provides an immediate financial lifeline on being made redundant – even more pertinent given the continued consequences of the current pandemic. Removing the statutory redundancy payment element from the final changes would be a crucial and welcome amendment.
"Finally, we remain concerned about issues involving TUPE transfers and the unexpected costs this may bring to new contractors and unexpected benefit reductions for employees made redundant on return to the ceding authority.
"In summary, it is somewhat ironic that much public money is having to be spent on legal and administrative fees, dealing with the imposition of regulations intended to limit public expenditure. It is clear that Government has disregarded the many previous warnings of the various issues the £95k cap would cause if not introduced in a timely and well-prepared manner."