After a judicial review challenge by Thompsons on instruction from a number of trade unions regarding the imposition of a cap on public sector exit payments of £95,000, the government has revoked the regulations which came into force on 4 November last year.

HM Treasury said the decision was taken after an extensive review of how the cap was being applied which resulted in the conclusion that it “may have had unintended consequences and the regulations should be revoked”.

The cap applied to payments including statutory redundancy pay, discretionary severance pay and most controversially employer-funded early access to pension payments (also referred to as pension “strain” or pension top up payments). These are payments made by an employer as an additional contribution to a pension scheme in respect of an individual’s exit on retirement before reaching the scheme’s normal pension age.

The guidance now issued by government advises individuals who left their employment between 4 November 2020 and 12 February 2021- and who have been directly affected by the cap - to contact their former employer and ask to be paid the amount they would have received had the cap not been in place.

Neil Todd of Thompsons has commented on the government retreat:

“The Conservative government tried to frame the purpose of the legislation as somehow preventing “fat cats” leaving public sector employment with pay offs which “reward failure”. The reality was starkly different. 

“The poorly thought through regulations impacted on loyal, hard-working public sector employees earning ordinary salaries. They stood to lose out on something they had understood throughout their career they would be entitled to if, through no fault of their own, their jobs got cut.

“These changes would have impacted on key workers who have worked tirelessly and bravely through the pandemic to keep public services running. 

“The government got this badly wrong and this decision is a victory for unions and working people.”

You can read the guidance in full here.