Redundancy/Business Efficiency


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Redundancy/Business Efficiency

Please be aware that the regulations concerning redundancy and business efficiency retirement have changed.

The Government has introduced a cap on the amount of money a public sector employer can pay when an employee leaves their employment. It is called the public sector exit cap, or £95k cap. It applies to employees leaving public sector employments from 4 November 2020.

Please read these Exit Cap Frequently Asked Questions if you are in the process of being made redundant or retiring on Business Efficiency grounds. 

If you are being made redundant please liaise with your employer directly as the position is complicated.

What happens to my pension if I am made redundant?

If your employer makes you redundant or retires you in the interests of business efficiency and you are aged 55 or over and have at least two years of scheme membership, your will be given the option to receive an immediate reduced pension or you can elect to defer payment to a future date.

What happens if I am made redundant but under the age of 55?

If you are under the age of 55 at the point of being made redundant then unfortunately your pension cannot be released at this stage. Instead your pension is deferred for you within the Fund and can be released from age 55 at the earliest but with an actuarial reduction applied if claimed before your Normal Pension Age (NPA).

Will my pension be enhanced in any way?

Your pension is not automatically enhanced if you are made redundant. However at their discretion, your employer can award an additional amount of pension to improve your retirement benefits. Your employer is required to produce and publish a statement of policy setting out how it intends to use this and other discretions available to it under the Scheme regulations.

How do I obtain a redundancy quotation?

If you would like an estimate of your pension entitlement assuming you were to be made redundant please contact your employer directly. Unfortunately the pensions team is unable to provide redundancy figures directly to scheme members but your employer can request such an estimate on your behalf.

Am I entitled to a lump sum from the pension fund if I am made redundant?

If you have built up membership prior to 1 April 2008 you will be entitled to an automatic tax-free lump sum from the pension fund. If you joined the LGPS after 1 April 2008 you will not be entitled to an automatic lump sum, however, you will have the option of converting some of your annual pension to purchase a lump sum.

If I am in receipt of my redundancy pension what happens if I become re-employed?

If you become re-employed elsewhere we will continue to pay your pension in the normal way.

Can I still convert part of my annual pension to purchase additional tax-free cash?

Yes, if you are made redundant you will still be able to convert part of your annual pension into additional tax-free cash. You are allowed to exchange £1 of annual pension for an additional £12 tax-free cash up to a maximum of 25% of the capital value of your total 'pension pot'. You will be provided with details of how this option applies to you before your benefits come into payment, as you will need to decide if you wish to convert any part of your pension into additional tax-free cash before that time.