Proposals on exit cap of £95,000 for redundancy payments and recovery of those payments if re-employed in public sector

The Government is proposing a cap of £95,000 on the total value of exit payments, such as those made on voluntary and compulsory redundancy.

The proposal is that the cap is set to apply to all forms of exit payments but in particular to voluntary and compulsory redundancy payments and including any potential strain on the fund costs due to early payment of pension after age 55.

The government is proposing to limit the potential benefits to employees who are offered early access to pension in place of, or in combination with, a lump sum compensation payment to within £95,000. Any costs in excess would need to be either given up or funded by the member.

The draft regulation changes are currently going through Parliament within the Enterprise Bill 2015/16. More details can be found at:

HM Treasury carried out a consultation last year on the proposals and the Government plan is for the exit payments cap to come into effect from autumn 2016.

Another area being introduced from April 2016 that will affect members whose earnings are £80,000 and above who leave and receive any exit payments is if they become re-employed within the public sector within one year.

Any exit payment would be subject to repayment either fully or in part depending on when reemployment commences. Agreement to recover must be in place before the new post commences.

The scope of those public sector employers affected is set out within the Office for National Statistics definition of ‘public sector’, except those granted an exemption.

Therefore not all employers within the Local Government Pension Scheme are classified as public sector and as such will not be subject to these changes. 

For more details on the proposed employer classification and exemptions go to:

Employees should consult their employer to find out if this could affect you.

Once the final regulations are in place and the Avon Pension Fund has full details these will be communicated to members on this website.

Please rate your experience on our website