Latest news & announcements

Public sector exit cap no longer applies

The Government has confirmed that the public sector exit cap will not apply to exits from 12 February 2021.

The exit cap applied to employees leaving public sector employments from 4 November 2020 - it limited the amount of money a public sector employer could pay when an employee left their employment to £95,000.

Guidance issued by the Government states any employees who left employment between 4 November 2020 and 11 February 2021, who are directly affected by the cap should contact their previous employer. The Government expects employers to now pay any additional sums that would have been paid, if the cap had not applied. The additional sums could be payable to you as an employee or to your pension fund to pay towards to the cost of you receiving your pension early. Check with your employer if you think this applies to you.

The Government remains committed to tackling unjustified exit payments and will bring forward proposals to do this shortly. It is likely that the exit cap could be introduced again later this year.

Pensions Increase

Pension increase

Government announces public service pensions which have been in payment for a year will be increased by 0.5% from 12 April 2021 in line with the September-to-September increase in the Consumer Prices Index (CPI). 

Any pension which has been in payment for less than a year will be increased by a proportionate amount depending upon the number of months it has been in payment.

Public sector exit cap introduced

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 4th November 2020.

The exit cap is most likely to affect you if you are a public sector employee aged 55 or over and you are made redundant or you leave your employment due to business efficiency. This is because the amount your employer pays to the pension fund so that you can receive your pension early is included in the exit cap calculation.

The Local Government Association have published LGPS member FAQs on the exit cap, which are available at the following location: https://lgpsmember.org/news/story/exitcap_qanda.php

Local Government Association (LGA) publish McCloud member FAQs

When the Government reformed public service pension schemes in 2014 and 2015 they introduced protections for older members. In December 2018, the Court of Appeal ruled that younger members of the Judges' and Firefighters' Pension schemes had been discriminated against because the protections did not also apply to them.

The Government has confirmed that there will be changes to all main public sector schemes, including the Local Government Pension Scheme (LGPS), to remove this age discrimination. This ruling is often referred to as the 'McCloud judgment' after a member of the Judges' Pension Scheme involved in the case.

The changes will apply to members who were in the scheme on 31 March 2012 and also have membership after 31 March 2014 (without a break of more than five years in any public service pension scheme).

Government announces changes to Lifetime Allowance and Tapered Annual Allowance from 6 April 2020

The annual allowance is the most you can save in your pension schemes each year with the benefit of tax relief. Tapering of the annual allowance is applied depending on your income within the tax year and applies to all pension savings that you make or that are made on your behalf. 

At Budget 2020, the government announced increases to the threshold income and adjusted income limits that you use to work out your tapered annual allowance. From 6 April 2020, the adjusted income limit will rise to £240,000 (increased from £150,000) and the threshold income limit will rise to £200,000 (increased from £110,000).

Late retirement factor changes

The Government have announced changes to the late retirement factors for the Local Government Pension Scheme (LGPS). These changes came into effect from 1 September 2019 and will affect members who carry on working beyond their normal pension age (NPA).  Members who retire after their NPA will see either no change to the increase they receive on their pension or a slight increase depending on how long after their NPA they are retiring.

  • Members who retire two years after their NPA will see no change to the increase they receive on their pension.
  • Members who retire over two years after their NPA will see a slight improvement to the increase they receive on their pension.

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