Redundancy/Business Efficiency


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Redundancy/Business Efficiency

As previously reported the Government introduced a cap on the amount of money a public sector employer can pay when an employee leaves their employment - called the public sector exit cap, or £95k cap. This affected members over age 55 retiring on redundancy/efficiency grounds from 4 November 2020. On 12 February 2020 the Government revoked the Public Sector Exit Payment Cap Regulations.

“After extensive review of the application of the Cap, the Government has concluded that the Cap may have had unintended consequences and the [2020] Regulations should be revoked. HMT Directions have been published that disapply the Cap until the Regulations have been revoked.”

The HM Treasury guidance is linked here

What is the redundancy/efficiency process going forward? 

Redundancy/efficiency retirements will continue to be processed as they were before. As a reminder we have detailed this process below: 

If a member is retired early on redundancy grounds (either through voluntary or forced redundancy) their employment is terminated in the interests of the efficient exercise of the service, their pension benefits are paid immediately if the member satisfies all of the following conditions:

  • They are aged 55 or over at the point they are retired on redundancy or efficiency grounds
  • They have at least two years membership of the LGPS (or less than 2 years having previously accepted a transfer of former pension rights into the scheme from another LGPS Fund)

Benefits paid in this way are released with immediate effect after the member’s date of leaving and paid for their lifetime without reduction. Please note: the member's pension is not automatically enhanced up to their NPA in the event of redundancy/efficiency. However the employer can apply a discretion to award additional pension - please consult your policy statement accordingly.

Any such retirement is a decision of the employer and not of the employee. In most cases there is a cost to the employer for the release of pension benefits on redundancy or efficiency grounds. Therefore we recommend you request an estimate from the pension team in advance of any decisions being made. We can then calculate in advance the value of the member’s pension benefits and the cost (if any) to the employer. You can request an estimate by completing form EST3 and forwarding this to