LLG President says “one simple tweak” could resolve issues with proposals for exit payments cap

The President of Lawyers in Local Government has called on the Government to draw a simple distinction between pension payments and severance payments amid reports of revised proposals for a cap on public sector exit payments.

In his latest blog, Quentin Baker, Chief Legal Officer at Hertfordshire County Council, said: “That way, the government can seek to cap the costs of exit, without undermining the quality of retirement of those made redundant at the latter stages of their working life.”

In March 2021 LLG and ALACE (the Association of Local Authority Chief Executives and Senior Managers) withdrew a judicial review claim ahead of the revocation of the Restriction of Public Sector Exit Payments Regulations 2020 on 19 March.

The Government decided to revoke the £95,000 cap on severance payments for public sector employees introduced in November 2020 after a review found that the measure had created “unintended consequences”.

In his latest blog Baker (pictured) said: “As the cap on exit payments is once again in the news with rumours of imminent announcements, I for one remain hopeful of a sensible and fair outcome for public sector workers.

“Surprising you may think, with the success of our judicial review still fresh in our minds. The challenge we launched alongside ALACE highlighted the impact of the Governments proposals would have in relation to pension rights accrued over many years and subject to legal protection against retrospective change. This aspect of the so called ‘exit cap’ was particularly pernicious in its effect on long standing local government employees and it is hoped that the Government will remove that element from any future proposals.”

The LLG payment said the government consultation on guidance for severance payments, “with one simple tweak”, would provide an uncontroversial way forward that would leave pension entitlements protected. “All that needs to happen is that any rules or guidance around severance payments should exclude the pension strain element from the cap.”

He highlighted how local authority pensions had been a positive benefit to employees in local government and one which had helped to recruit and retain staff.

“A promise made at the start of a career, a contractual right that should be upheld. It is disheartening to see the scheme’s reputation tarnished publicly by linking pension entitlements to so called town hall ‘fat cats’. Pension payments do not create ‘fat cats’, they create a future for loyal, long-serving employees in their retirement. And as we know, it is not just those in senior positions who lose out if the pension strain on redundancy is capped, it has an impact on a significant percentage of the workforce.”

The LLG President warned that without the distinction being made between exit payments and severance payments, loyal and long-serving staff may end up struggling, underfunded in their pension. “Is that proper payback for a lifetime of public service?” he said.