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Sarah Ward: Good afternoon everybody, thank you for joining us. My name's Sarah Ward, I'm the principal advisor in the workforce team at the LGA. Thank you so much for joining us this afternoon on this important briefing webinar, where we're going to be talking about exit payment reform. We're going to tell you as much as we know and give you as much information that we can at this point of time. As you'll appreciate, it's a really fast moving and complicated situation, so the LGA team has been working at pace to understand as much as possible and share that knowledge with you today.
We'll continue to update as things move and progress and we'll share all the information we can through our usual channels. We've got an hour's session today. I just want to remind you right at the beginning that this is-, today's session is gonna be focusing entirely on local authorities. So, if you're not from a council or you've got a question that's not council related, you're really welcome to join us today, really welcome to listen, but we might not be covering all that detail today.
We will, however, be doing other sessions further on down through the autumn, so there will be another opportunity, I can promise you. So, let me just mention a couple of housekeeping points before we get into the main issues that we're gonna talk about today. First of all, questions. If you'd like to ask a question and we'd really welcome and encourage you to do so, please use the Q&A function. You can post questions in there.
We'd welcome you to tell us a little bit about yourself, where you're coming from, and as I'm sure many of you know by now, if you like a question or you see a question that you agree with that somebody else has posted, you can like it and that just lets our team know that that’s some information that would be really useful to share with you. We are gonna have limited time, so we won't get through all of the questions, but we'll get through as much as we can. What we'll do, as we always do, and those of you that have joined us on LGA webinars before will know by now, we'll go through the Q&A's at a later stage after the webinar and we'll make sure that we pick out the key themes, we'll update FAQ's, and we'll get information to you.
So, don’t worry, keep in touch, and we'll keep on sharing what we know. Just to say that today we have quite a lot of slides to take you through, it's quite a complex subject matter as I'm sure you'll appreciate. So, do bear with the speakers as they go through the slides. What we'll do is we'll take questions at the end. Obviously, some of the questions that you might have might be answered by a later slide, well also that just helps the webinar run that little bit more smoothly. And, as always, you'll be able to access the slides at the end of the webinar when they get posted into the events section of the LGA website. So, don't worry about writing it all down, just sit back, relax, immerse yourself into the wonderful world of, of exit payment reform, and you can study the slides later on this evening at your leisure.
So, onto the speakers. We have three highly experienced and expert panel members for you this afternoon. First of all, we'll be hearing from Naomi Cook who is the head of workforce at the LGA. Naomi will then pass on the baton to Lorraine Bennett, Lorraine is part of the LGA pensions team and she's a senior advisor working on the LGBS. Finally, Naomi and Lorraine will be joined by Philip Bundy from our employment relations unit which is part of the workforce team. So, between the three of them, they'll make up the panel in the final part of our webinar to be able to respond to the questions that you raise as the webinar goes on. So, I think that's covered everything. Without further delay, let me just ask you for your patience as always with the technology, but I'm now really delighted to hand over to my colleague Naomi Cook. Naomi.
Naomi Cook: Thank you Sarah. So, good afternoon everybody. As Sarah said, I'm Naomi Cook, the head of workforce at the LGA, and I'm gonna start off by setting out where we are at the moment with local Government exit pay changes. So, we've got two topics for today, the £95k cap and MHCLG's consultation on further reform. So, just to be clear, what we're outlining today is based on what we know at the moment. There are a lot of uncertainties and a lot of gaps in what we know. HM Treasury should be providing more information on the areas of uncertainty, as should MHCLG, but we have got to focus on what is known at the moment and that's what we'll convey, and we'll update later on as and when more information becomes available. Also, just to reiterate, we are only covering local authority employers today.
There are a lot of issues with related employers where there's even more uncertainty, and we'll aim to pick that up on the next webinar when we should have more information. So, everything we say today solely relates to local authorities as employers. So, firstly to summarise how we got here. The £95k cap was initially proposed more than 5 years ago. The legislation to bring the cap in is going through its final-, its final parliamentary stage at the moment.
Today, it's being debated in the House of Lords, and we understand it then has to go for a vote in the Commons before it becomes law. According to the terms of the legislation, 21 days after it's approved, it becomes law. So, although we haven't got anything definitive at the moment, the earliest possible time this could be would be around the 15th, 16th of October, assuming the Commons vote is immediately after the Lords debate. It probably won't be, but there's no confirmed date for the final Commons vote.
So, we're-, we await confirmation of when this will actually come into place. Now, in itself, the legislation is pretty simple. Aside from ill health cases, no one in the public sector, the definition of that is a little complicated, can receive an exit package of more than £95,000. This includes the amount of money an employer would pay into a pension fund in order to fund unreduced early access to pension. This is known as the strain payment, and Lorraine will go into more detail on this in a moment. In local Government, the strain payment is generally the major part of an exit payment for people aged 55 and over. MHCLG, the ministry responsible for local Government, recently launched a consultation to change the pension rules and compensation rules that apply to local Government.
Their proposals will amend the LGPS scheme rules to allow the £95k cap to apply. However, MHCLG's proposals go beyond that, and they set out further reforms that would limit the amount of severance cash an individual can receive. These plans were issued by Treasury about four or so years ago for the whole public sector to implement. As yet, however, no other part of the public sector has successfully done so. This, this is the reason we're clear at the outset that this session is for local authorities only. The scope of these changes is unclear, and how the different rules apply to norm council employers cannot be covered in one webinar. So, for today, we're only looking at local authorities as they are affected by both the £95k cap legislation and the further reforms that are proposed by MHCLG. And to start going through that, I'm gonna hand over to Lorraine to take us through those changes.
Lorraine Bennett: Thanks Naomi, and good afternoon everyone. As Sarah said at the beginning, I'm Lorraine Bennett, and I'm senior pension advisor at the LGA, and I work on the local Government pension scheme. So, I'm going to spend a little bit of time setting out what the current position is when local-, when local authority staff are made redundant, and what their proposed position is, taking into account both the £95k cap and the proposals in the MHCLG consultation on reforming local Government exit pay. So, to start with, we're gonna have to look at the current position for employees who are made redundant and are not entitled to the immediate payment of their LGPS pension.
This would be because they're either under age 55, or over 55 and not currently paying into the pension scheme. Both these groups of people would be entitled to receive, under the current rules, a statutory redundancy payment and possibly a discretionary compensation payment of up to 104 weeks' pay, and that compensation payment will subsume the statutory redundancy payment. The discretionary payment is just that, so whether it is paid depends on the employer's policy and as the slide states, the employer can choose to use the employee's actual pay in the calculation rather than the statutory weekly limit if the actual pay is higher, and the current statutory weekly limit is £538 per week. Employees who are paying into the LGPS and under age 55 will also qualify for a deferred pension benefit.
So, this is the benefits they've built up in the LGPS, will stay in the scheme, until they take them at a later date, and this can be at any time between the age of 55 and 75, normally payable from state pension age in full. If they take them before state pension, they're being reduced for early payments. If they take them after state pension age, they will be increased. Okay, next slide please, thank you. So, their proposed position then for this group for employees is that they will still receive their statutory redundancy pay, but the discretionary compensation payment is-, will be limited to, to the conditions that are set out on this slide. So, that will be, the calculation will be limited to a maximum of three weeks' pay per year or service or a ceiling of 15 months, whichever is the lower of those two.
The, the calculation will limit the amount of pay that can be used to it, so only a maximum salary of £80,000 will be able to be used in the calculation, and once you've worked out all of that, that is then still subject to their cap of £95,000. So, that's the proposed position. Again, members of the LGPS under age 55 will also qualify for that deferred benefit which is payable between the age of 55 and 75 with the appropriate reductions or increases. Okay, thank you.
So, moving on to employees who are in the LGPS and over age 55 when they are made redundant. The current position is that they will receive their statutory redundancy payment, and a discretionary compensation payment in line with the employer's policy, again up to the 104-weeks' pay with or without the weekly limit applied. They must also take payment of immediate payment of their LGS pension benefits, and it is not reduced for early payment. That's a requirement of the LGPS regulations. The employer has to pay the relevant pension fund, what we call a strain cost, and this is the amount that the LGPS administering authority estimates that early retirement will cost. The strain cost is currently calculated on a local basis, on local assumptions, life expectancy, actuarial assumptions. So, that's the current position for those over 55 in the LGPS. So, the proposed position, thank goodness that I've moved on, the proposed position for these members is that the total cost of the exit will be limited to the greater of the strain cost which will have a maximum of £95,000 because of the £95,000 cap, and that will be inclusive of the statutory redundancy payment, or a discretionary payment calculated with reference to the new limits.
So, the maximum three weeks per year of service, fifteen months maximum salary of £80,000. So, in almost all cases, the strain cost is going to be larger than the discretionary payment so employees will have to choose whether to receive either a discretionary compensation payment or have their strain cost paid up to £95,000. In the rare cases where the discretionary compensation payment is larger than the strain cost, the employer will then be able to pay the strain cost and make a cash payment equal to the difference between the strain cost and the discretionary compensation payment.
One thing just to clarify here, make clear, is that the strain cost is always going to be reduced by the statutory redundancy payment irrespective of how much the strain cost is. So, even if it's below £95,000, it's going to be reduced by the statutory redundancy payment. So, unless the employee elects to give up their statutory redundancy payment and use it towards the cost of the strain, they will always have an actuarially reduced pension. That's quite a-, quite a, a change. Another important point is that the strain cost going forward will be calculated on a standard basis across all LGPS firms in England and Wales.
This means it is more likely to be the true cost as it will not be based on the local experience, life expectancy, actuarial assumptions. The difference, of course, will be picked up at the next valuations. Currently, valuations happen every three years but it could impact on employer contributions if the strain cost isn't enough or is too much, and that may take some explaining to employers. Okay, thank you. So, now let's look at the different options that will be available to employees.
So, first of all we're going to look at the impacts where the £95k cap is not breached and we're going to set out the three different options that employees will have. So, in these examples, we're going to assume that the employee is over aged 55, is paying into the LGPS. We're only going to take into account the statutory redundancy pay, discretionary compensation payment, and strain cost. We know there are other exit payments that employers pay, but we're assuming that all those have been given up at this point. And just to be clear that the pension lump sum payable from the LGPS isn't included in the definition of exit payments for this purpose, just to make that clear.
So, for someone who's over age 55, in the scheme, gets made redundant and the strain cost is under £95k cap, so the breach isn't-, so the £95k cap isn't breached, option one for this person is they will receive their statutory redundancy pay and their pension paid immediately, but it will be reduced by their statutory redundancy pay amount. So, they have a partially reduced pension. The reduction will be worked out taking the strain, taking the statutory redundancy pay, off the strain cost, and then using actuarial factors to work out how much the pension will be reduced by. Or, this person could decide to give up their statutory redundancy pay in exchange for a completely unreduced pension. So, in short, option one is where the member takes immediate payment of their pension but it will be reduced if they take the statutory redundancy pay as cash. As already mentioned, in the rare cases where the strain cost is less than the discretionary compensation payment, they can receive the difference as cash. Okay, thank you.
Moving on to options two. So, the second option is that they receive statutory redundancy pay plus a discretionary compensation payment if that's in line with the employer's policy and that again will be subject to the new limits, the maximum three weeks per year of service etc. This person would receive, because they're receiving a discretionary compensation payment, they won't receive pay-, immediate payment of their unreduced pension. So, no strain cost is payable, but they will receive a deferred pension payable from the LGPS, and that will be payable in full at state pension age and they can take it anywhere between 55 and 75 still with the appropriate reductions or increases. And the third option for these people is the same as option two, so a statutory redundancy payment plus the discretionary compensation payment, again subject to the limits, but these people can take a immediate payment but it will be fully reduced to reflect early payment.
So, those are the three options that show the impact of how the reforms take effect where the £95k cap isn't breached. We're now going to look at where the £95k cap is breached. So, again, we're assuming the employee is over aged 55 and paying into the LGPS. The £95k cap is breached. So, this person can receive statutory redundancy pay as, as cash, plus immediate payment of a partially reduced pension and it will be reduced because the employer can only pay a strain cost of up to £95,000, less the statutory redundancy payment. The employee can choose to give up the statutory redundancy payment, and use their own funds to pay towards the strain cost, to lower the reduction applied to their benefits if they want. And with their own funds, they can choose to buy out some or all of the reduction.
So, statutory redundancy pay, just to recap, is paid as cash. They can have an immediate payment of reduced payment unless they make up the strain cost shortfall with statutory redundancy pay and their own funds depending on how much the shortfall is, okay? So, options two and three for this person, for these people, are the same as for the employee who doesn't breach the £95k cap, and that is statutory redundancy payment plus a discretionary compensation payment subject to the limits already mentioned. There'll be no strain cost, but the person can take a deferred pension, a deferred pension that will stay in the fund until they take it again anywhere between the age of 55 and 75. Or, they can take an immediately reduced pension based on the standard retirement factors.
Okay, so those are the quick run through, I hope I didn't go too quickly on the different options. So, aside from trying to get your heads around all of that, there are obviously going to be other challenges that you're going to-, that these proposals are going to pose. One of which is communicating the different options to your employees, and making sure that they understand them, which is going to be quite tricky. The pensions software firms have confirmed that they're not going to be able to proband (ph 19.15) the changes in time for the timescales that HM Treasury are working to. So, it seems that some of the calculations are going to have to be done manually until the updates are done, which is obviously a further challenge. And of course, where employees do decide that they want to use their own funds to buy out some or, or all of the early reduction, there's going to be the, the need for much closer liaison between the employer and the pension fund. We at LGA, the pensions team, will work with the national communications working group to assist LGPS (inaudible 19.46) authorities with the communication aspect and then other aspects of this as much as possible. But there are definitely challenges ahead, and I'm now going to pass back to Naomi, who's going to tell you all about waiving the exit cap. Thank you.
Naomi Cook: Thanks, Lorraine. So, the next few slides relate to exemptions from the £95k cap which can be done through a mandatory or a discretionary waiver process. But just to be absolutely clear, there are no exemptions proposed for the further reforms in the MHCLG consultation, and that's the three weeks £80k cap on salary usage. There are no exemptions proposed for that, so this only relates to the £95k cap. And for that, there are two waiver options. Mandatory, which covers broadly speaking cases where redundancy benefits are protected by TUPE, and certain ET cases, employment tribunal cases, where the person deciding whether to allow the waiver is satisfied that a tribunal would make an award. Now, originally, this was restricted to whistleblowing and discrimination cases but it will now also cover health and safety cases as well.
So, that is the mandatory waiver. Mandatory is relatively simple if quite restricted. The discretionary how-, waiver, however, is not simple. Now, this, the next slides all outline what was set out in the draft directions and guidance. As of the last hour when I last checked, we don’t have the revised directions and guidance from Treasury even though it's being debated in the House at the moment, we're awaiting the final set of directions and guidance. So, please be aware, this is based on the draft. It will almost certainly be updated although we understand the intention of Treasury is the same. So, discretionary waiver will be an option in these three scenarios as far as we can tell. Undue hardship which we believe will have quite a tight definition and is intended to be very rarely used but it is the first scenario where a discretionary waiver may apply.
Now, workforce reform is probably the one that will be of most use to councils, it isn't defined, but would probably cover most occasions where a council might want to apply a waiver. So, things like reorganisation, restructuring and so forth. The third one, delay not attributable to the individual may well come into play in situations where individuals would have left before the cap became law but didn't because the employer asked them to stay on, for example until Christmas or to cover the next stage of the COVID response or something similar. If there is a basis for the discretionary waiver, the draft guidance proposed a rather bureaucratic approach to actually securing a waiver which is set out on this slide. To speed up the process, MHCLG have indicated that they would do their civil servant and ministerial approval process at the same time.
In the Commons debate on Monday, the Chief Secretary to the Treasury did not indicate that Treasury have rethought this approach, although we will need to see the final guidance and directions to be sure. So, to be clear, our understanding at the moment is that the discretionary waivers require full council approval and then a business case to be seen and approved by MHCLG twice, and HM Treasury. Without Whitehall sign off, councils cannot agree severance arrangements that exceed £95,000, aside from the limited circumstances outlined for mandatory exemption. We don’t know what, if any, feedback will be forthcoming from the central Government part of this process, so there could be an element of ping pong in getting a waiver through.
Before we get too concerned about that process, however, there is a more immediate concern that relates purely to the timing of legislation. Even with a 21-day window between the £95k cap legislation passing and the law coming into effect, there's highly likely to be a gap between-, before the LGPS scheme rules are changed. The problem is set out on this slide and as you would expect, we have raised with both MHCLG and HM Treasury. MHCLG have confirmed that there will be guidance for councils to cover this point, but as yet, that guidance hasn't been produced. So, notwithstanding views on the cap itself, the LGA has flagged concerns about how it is to operate. We will continue to seek clarity from Government, but all we can say at the moment is that when we receive that clarity, we will pass it on to councils. So, I hope that has been useful overview for you even though there isn't as much certainty in it as I would have liked, but hopefully you can understand the reasons why that is the case. So, with that, I'll hand over to our question wranglers for the next section of this webinar.
Sarah Ward: Thank you Naomi and thank you Lorraine, we appreciate you giving us your time and your thoughts there, and taking us through that slide deck. So, colleagues, a number of you have asked and I can only assume it's down to latecomers and I won't be taking down names. But, the slides will be going into the LGA events section of the website. As I understand it, as soon as the webinar is over, more or less, the events team post them straight in there, so I promise you, you'll be able to download the slides and, and have all of the information in there.
I just-, I had a quick look in the Q&A which is always a, a nightmare isn't it, when you're chairing any kind of webinar. But I saw a really interesting point from Joe about making some of the examples a bit more, making use of a flowchart or a numerical way of expressing some of those examples and, and we'll take those away and look at how we can find easier and more straightforward ways to explain this information. We, we did warn you at the start and I think you all knew this was gonna be a complicated one, so it is difficult. So, let's try the best that we can to, to use the time that we've got left to put some of the thematic questions to the panellists. We can't obviously deal with every individual scenario, but we're gonna do our best to work through it and there's quite a lot of very different sets of, of, of things being asked. I, I've jotted down a few as we go and then I'll keep working through the, the, the chat and the Q&A. Please do use the Q&A, not the chat, because that does throw us off.
So, first question and, Phil, I'm gonna put this to you so you can get ready to come in. The question is, will exits currently under discussion by an authority be covered by the £95k cap if the person hasn't left or indeed didn't leave by the time the cap comes into force? Phil, can I ask you to pick that one up?
Philip Bundy: Yep, sure. The position at the moment is we don’t know because it's gonna depend on the Treasury directions that come out and we only have the draft one at the moment. As Naomi said, the scope there for payments agreed beforehand to still be paid that would (ph 27.31) go over the cap is limited in those draft directions because it's only where someone's delay-, some has a delay to their exit, and that wasn't the employee's thought (ph 27.42). But, I think, you know, what employers need to do is in the interim, keep an eye out for the directions when they come out and don't make any guarantees to, to employees that the cap won't apply.
Sarah Ward: Okay, thank you very much. Okay. I'm going to keep moving on. It may be that the panellists want to engage with one another, we'll see how this goes and you can, sort of, wave or, or, or come in, colleagues, if you feel that that's gonna be helpful. So, second question that I wanted to ask is going to come to you Lorraine. Will the cap apply to flexible retirements where the employer has to pay a strain on fund cost?
Lorraine Bennett: Well, the cap applies to exits, so only when someone is exiting the employment. So, a flexible retirement should, if it's done properly, should be a variation to a contract. So, it shouldn't be an exit. So, it really rather depends how it's done, but if flexible retirement is, is usually just a change in hours or grade, and is a variation to a contract, then no, it shouldn't apply. But, just to caveat that to say that we have been told that if it becomes apparent that flexible retirements are deliberately being used to avoid the cap, then legislation will be changed to prevent this in the future.
Sarah Ward: Okay, that's great, thank you very much for that. So, I'm just looking down my, my list on the chat now. So, the-, the third question is about TUPE, Phil, I think this is probably another one that should come to you. Will the TUPE waiver apply to local Government reorganisations where employers transfer from one local authority to another?
Philip Bundy: Well, that, that'd lay the basis of a nice exam question, I think, Sarah. I've been asked this before by a couple of authorities, and I think the issue here is that the mandatory exemption under the Treasury direction only applies where there's a TUPE transfer under the TUPE regulations. And when you've got local Government reorganisation, technically, that doesn't fall within TUPE because of what's called the henkey (ph 29.50) exemption, it doesn't, sort of, apply to machinery of Government changes. So, on the face of it, you know, where people transfer in this type of situation is by a special transfer order, but that is not under TUPE. So, on the face of it, the exemption would not apply. So, on the face of it, the exemption would not apply.
The other issue as well, is that for TUPE protections to apply, you've got to have something like a contractual benefit and entitlement to redundancy. And in, in local government, our redundancy schemes are discretionary. So, you know, what transfers even if there is a TUPE transfer isn't something that perhaps you could say is protected by TUPE. It would be different, say, if someone transferred in from a private sector employer with a letter guaranteeing them a redundancy payment if they leave of 100,000 then that would be TUPE protected. And you be able to go above the cap in that case.
Sarah Ward: Wow, okay, thank you for that. So, helpfully colleagues, you might be able to hear, I've got building work that's started up next door, which is always delightful in the middle of hosting a webinar. I'm so pleased. So, I'm going to ask Naomi now just to pick up a question. We've, we've said that today is all about councils, but obviously a lot of people are saying look, what's happening everywhere else? So, Naomi, can you comment for us? What's happening in other sectors?
Naomi Cook: Yep, I will do my best. Mostly, not a lot is happening in other sectors, although the 95K cap, of course, will apply across the board. With a few exceptions. For example, armed services, security services are exempt from the cap. There is a very long list of organisations that are covered by the cap that's attached to the legislation that's currently going through parliament. That list will have to be kept updated and there are some issues about how often that will happen. But the 95K will, will cover most areas of the public sector. Now when it covers to the further reforms however, and that's the MHCLG consultation aside from the bit of that consultation that's about the 95K cap, the further reforms bit. Treasury intended, several years ago, for each relevant government department to implement those reforms for their workforces. So, obviously for local government, that's MHCLG. The Cabinet Office attempted to do so in relation to the Civil Service a few years back but their changes were then overturned, I think, through a judicial review. So, as far as we're aware, no other part of the public sector has live proposals for further reform. Although, obviously it's possible and we're keeping in touch with, in particular, DfE, DHSC and so on, to see if there are any proposals coming through to those other sectors. But as far as we're aware, there are none proposed at the moment, so local government's going first in this regard.
Sarah Ward: Okay, thank you very much for that. Okay, colleagues, we've got about half an hour left. And there are, I can see at least 45 new comments posted in the Q and A box. So, we're going to do our best to try and wade through some of this. But we, we, we may lose a little bit of our smoothness that you've, I'm sure appreciated thus far. The very first question that came in really, really, you know, Steve you were quick off the mark with this. So, it would be outrageous if I didn't ask it. And I think, Phil, you're going to pick this up. Are notice payments included in the 95K cap? Let's start there.
Philip Bundy: Yeah. There's a specific provision in the regulations that basically say pay in lieu of notice up to three months isn't covered by the cap, but anything above that would add up to go towards the cap. So, if you have six months' notice, you could only-, three months of that would be included in the 95K figure.
Sarah Ward: Excellent, thank you very much for answering that. Okay, the next question I am going to ask is, would a settlement agreement, making an ex-gratia payment be covered by the cap or would this need to be covered by a waiver? I think, Naomi, that's probably one for you. So, a question about settlement agreements there, making ex-gratia payments.
Naomi Cook: Phil may have something to say on the ex-gratia payments. But the intent of the regulation and we'll start there is to cover anything that looks like an exit. So, that would include settlements as well. Explicit exclusions for ill health but they generally intend everything else to be covered except normal retirements, normal leaving and ill health.
Philip Bundy: Yeah, and I'd, I'd agree with that. The only thing is there's a mandatory exemption, say if it was a settlement agreement in respect of a Health and Safety whistleblowing discrimination claim etc. where the decision maker was satisfied that, that there was a valid claim there. So, yeah, the sums paid under the settlement agreements are covered.
Sarah Ward: Okay, thank you very much for picking that up, colleagues. So, questions are coming in about Wales. Does anybody want to comment about Wales? Have we got any intelligence on the position in Wales? Are they taking a different approach? Is it going to apply? Does anybody want to volunteer a response to that?
Naomi Cook: Yes, they have a slightly different setup. So, it still applies to Wales, although differently in Scotland, differently in Northern Ireland. The waiver process in Wales is far simpler. From memory, they resort to Welsh ministers only. So, there is a different-, a different approach there. But again, this is all subject to the final text of the directions and guidance. So, it's not set in stone as yet.
Sarah Ward: Okay, thank you Naomi. So, another question here. And I'm trying to liven these questions up but this is-, this is difficult material. Will the amount of statutory redundancy pay be deducted from the strain cost-, sorry, will the amount of statutory redundancy pay to be deducted from the strain cost be based on the actual week's pay or the maximum statutory week's pay? And we're also being asked, what-, well, I'll come back to that. So, anybody want to volunteer on that one?
Lorraine Bennett: I can come in.
Sarah Ward: Thanks, Lorraine.
Lorraine Bennett: So, it will be a statutory redundancy pay with a weekly limit applied. So, it won't be actual pay.
Sarah Ward: Lovely. Couple of times this has come up. What will happen if the regulations are breached?
Philip Bundy: Shall I have a go at that?
Sarah Ward: To me, it's too early to say, isn't it? Go on, Phil.
Philip Bundy: Yeah.
Sarah Ward: You want the exam questions.
Philip Bundy: Yeah. I think it's the usual rule if, you know, an authority's in breach of the law, someone could seek to challenge that. You could be judicially reviewed. If you've already paid the money over, then things could get more complex than trying to get the money back because I think, you know, there could be an order, a court order potentially for you to try and get that money back. You get into complicated issues around why was that-, why was the cap breached, all the rest of that. And the area of mistake in law, which is very complicated. So, I think we'd have to wait and see. But with, with this, it, I think the intention is people don't do it in the first place. I think, you know, where it would be more likely to happen is where, say, someone in-, it's unlikely to happen, but they leave when one employer, get an exit payment, get another job and then there's a, very, exit soon afterwards from a public sector employer and that would count towards the cap, potentially. But that's going to be a very rare situation.
Sarah Ward: Okay, thanks Phil. So, I think, colleagues. As the Q and A box grows, I'm just going to remind you all that while we probably won't be able to pick up all of the questions that you pose in there today. Not least because it's, the volume of traffic is, is, is intense and, and coming, coming in thick and fast. But I promised right at the beginning that what we will do is go back through all of this. And we always do this when we do these webinars anyway is we'll pick out themes, we'll write FAQs and we'll deal with as much as we can. So, this is new to everybody so we, we will carry on working through this together. I absolutely assure you. Now, very unfairly, a couple of you have mentioned the word McCloud, which most of the team and my colleagues here, that's one of their very difficult words. So, is-, but I'm going to ask it. I mean, that's my job. So, is there any interaction with McCloud on this? Is there any links, anything we need to worry about? Anything there that we need to-, any links there that need to make or be cognisant of? Colleagues, who can I ask to pick that up? They're all drawing breath. Lorraine?
Lorraine Bennett: Probably one for me. I think there might be-, there might be an impact. I haven't thought that one through completely yet. But if we've-, I suppose if we're-, if we apply a remedy-, when we apply the remedy if there's something extra payable, that could be a consideration. I haven't thought it through. I'd prefer to answer that one in writing, if possible.
Philip Bundy: I think-,
Sarah Ward: Does anyone else-,
Philip Bundy: Yeah, I think-,
Sarah Ward: I think, Phil. Yeah-,
Philip Bundy: Yeah, I just come on this. We're waiting for the, the government to publish or MHCLG to publish a full equalities impact assessment, so we'd have a look at that. I think one of the issues we need to keep in mind here is yes, this will hit older workers more, in terms of what they lose now, or compared to what they get now. But in most cases, they should still be getting more than younger workers. So, I think you just need to factor that in. You know, it will hit older workers harder compared to what they get now, but not compared to afterwards, when it's in place and then compared to a younger worker.
Sarah Ward: Thank you both, I think, for, for venturing out into the brave world of McCloud on that one. I think we appreciate you both sharing your thoughts with us at this early stage. As Lorraine says, everything that we say comes with a caveat. We, this is what we know right now. It's all new and emerging and we will be providing written updates as and when we can. So, I'm going to keep going. They're on their toes this afternoon and you're certainly making them earn their cups of tea this afternoon. Do we have a view on dealing with a potential conflicts of the 95K gap and LGPS, if 95K cap comes in first? That's, I think, Naomi, that's one for you. We've touched on that a little bit, but Naomi, do you want to answer that?
Naomi Cook: Yes. It, it is the main thing that we have been in touch with government departments about since we discovered that 95K cap was going back through the House again this week. We, and to be fair, MHCLG have impressed upon them that it is really important that the pension scheme rules are changed before the cap comes in, in order for all the options that Lorraine outlined to actually be possible. At the moment, and as many of you will appreciate, there are lots of legal views on the situation that may arise with the conflict of legislation. So, there is not one scenario that is definitely the case, but we are concerned that councils will have conflicting obligations between those set out in the pension scheme rules, which are not discretionary, which are absolute and those set out in the 95K cap legislation, which are also absolute.
There are a few scenarios that could flow from that, none of which we believe are desirable either from Treasury's perspective or from councils or for the certainty of individuals caught up in this, you know, through no fault of their own. So, we are, that's why we've asked MHCLG that if that happens, that the 95K cap comes in before their regulations are amended, they will put out guidance to councils to tell them what to do in that situation. We want that coming out from government so councils have the reassurance of guidance from government on the situation that it's created by a conflict in, in regulations. They have committed to do that, but we don't have the text of that as yet, but they have committed to publishing that should the conflict of legislation occur. Shall I pick up an indexation question?
Sarah Ward: Yeah, I was going to come to you next on that, yep. (talking over each other 42.42)
Naomi Cook: I'm picking off the easy ones because I can see them. There's no indexation. Yes, the £95,000 figure was, first came up five or so years ago, might have been six years ago by now. That has not been indexed. It is still a flat 95,000 so they would need to amend legislation again to change that. It's not linked to CPI or anything else. There is no index of it either, since when it was proposed and now, nor going forward into the future. It is a fixed £95,000.
Sarah Ward: Thank you for that. Phil, I'm going to ask you to come back on the, the TUPE and LGR exemptions. I think too, too might be-, we need that one again. DO you mind just going over? The question-, the question just says, 'Could Phil repeat the TUPE LGR exemptions?' Do you mind just doing that again?
Philip Bundy: Yeah, the issue with local government reorganisation is normally that is not a transfer under the TUPE regulations itself. And the reason for that is TUPE itself contains a provision that says if it's a public, sort of, reorganisation of one-, from one administration to the other, then the TUPE regs themselves don't apply. You know, we're not talking here about outsourcing or insourcing. We're talking about, you know, the structure of a council or the constitution changing to a different council or, you know, the reorganisation stuff. And the issue then is that the mandatory TUPE waiver under the Treasury directions as we understand them only applies to transfers under the TUPE regulations themselves. So, if someone's not transferring under the TUPE regulations themselves, and instead they transfer under specific local government reorganisation legislation, then that exemption on the face of it wouldn't apply and the cap would apply to any benefits that, that transfer with that individual under the reorganisation process.
Sarah Ward: Gosh, thank you very much indeed for picking it up again. We've got a couple of requests. I'm going to ask your question, Nicola, but there's been some specific asking for whether we could type the reply. We, we just can't do that today because it's too all over the place with the amount of, of, of the text moving and people answering questions. But as I've said, we will go through all of the Q and A and all of the chat after the event and make sure that we're able to pick out stuff. So, this isn't going to be the only-, and we'll do more of these webinars as well. So, this won't be the only opportunity to get some clarification on some of these very detailed points. But the question that was being asked in that regard was about pension strain impacts.
Will there be any scope for relaxation of the gap? Can I see if anybody would like to pick that up? Maybe too early to say. Yeah, I think, okay. I, I, I, I think nobody wants to comment on that right now, in terms of relaxation for the cap. I don't think-, it's one of those things that this is all new and emerging and we'll come back to. But we've got the question and we will come back to it. Or Lorraine is going to venture out.
Lorraine Bennett: I was going to say, only, only, the, the waivers that Naomi has already gone through because pension strain is counted for towards the 95K cap and so the waivers are the same for that as, as the same as any other exit payment that's included in that.
Sarah Ward: Okay. Thank you, Lorraine. Yep, that's a really good point. So, I'm trying to pick out some of themes here. What about settlements long after the exit, for example if ACAS do a settlement some months after. What would happen then? Does anybody know? Not yet. See, you're, you're really catching us out here this afternoon, folks. We're gonna have to take some of these-, oh, Naomi's going to give it a go.
Naomi Cook: Yeah, some of it is because we're having to guess on the basis of draft guidance and directions. So, you know, don't regard any of this as, as, definitive because all of this information was contained in the draft guidance. And until we see the actual guidance, we don't know whether of this has changed. We, the LGA put in, I think it was a 46-page response to the consultation. A lot of that was asking for amendments to the directions and to the guidance, in order to make the legislation workable.
We don't know how much of that has been taken on board but we certainly raised issues like delayed settlements, tribunal rulings and so forth. And the value for money argument about, sometimes it's necessary to breach the 95K cap in order to secure a greater saving. But we have no information that anything has been taken into account on the back of that. So, to be honest, a lot of those things, we are going to have to wait for the guidance before we can-, before we can be sure and we fully expect there may be some further gaps in the guidance as well. There were in the draft, so we will follow that up, as and when we see the guidance itself.
Sarah Ward: I think that's a really good point for us to bear in mind. As you say that there's lot more information still needing to be come-, coming forward on this and we need to see where we are. This, this is an excellent question. I don't know who's asked it. It's in the chat here about how this is all being communicated by the LGA to council members. But also, is there any advice on how to deal with members locally at this stage? So, a little bit-, perhaps we can talk a bit about where we're going forward from here and how we're going to start sharing information and what happens next. Naomi?
Naomi Cook: I can-, I'll talk about that from the, sort of, workforce side of it and Lorraine might want to add in what support we can give on the-, on the pension side too. We weren't expecting a parliamentary debate this early because of the juxtaposition with the MHCLG regulations. It is still possible that it won't get through parliament until later on in the year, and that will be less of an issue. But it depends on the scheduling of, of the Commons vote. So, as and when we know when that is, and we can actually put some certainty on these dates, we will be updating councils in a number of different ways. We do it through chief exec's bulletin, that goes out from the LGA to, as you'd be-, as you'd expect, chief execs. The workforce bulletin that goes out to all people who are signed up to the workforce bulletin.
The advisory bulletin, as well, will look into the more-detailed legal aspects of it. And I believe pensions will, will do similar. We'll also do more of these webinars if people feed back and say this is useful. We can do that as these things develop as we indicated at the start, there's a still a lot of uncertainties, particularly around non-council employers. So, you know, schools, academies, outsourced providers and so forth, where councils have an interest but are not directly the employer. But also I think it would-, it would be sensible to pick this up again later once we've seen the guidance itself. We thought we might have done by now, but we haven't. So, we'll, we'll do more of this and keep an eye on the website as well because we will update that regularly as and when information become available. Lorraine, do you want to add in on the-, on the pension side of things?
Lorraine Bennett: Yes, I do. So, we will, obviously as everyone has said lots of times. There's still more clarity that's needed. But once we have that clarity we will work, there's a national communications working group and we're meeting next week. And that has twenty LGPS administering authorities represented on it and we work to produce national communications. So, we will work with them to produce communications for employers and members to assist administering authorities. We will do our-, we will disseminate the news in our usual ways, our monthly bulletin and on, on our websites as well. And we will-, we have a regional pension officer group meetings, we have them. So, we're communicating this at those meetings and I'll take feedback and take any suggestions on board as well.
Sarah Ward: Brilliant, thank you both. There's just two areas left I think we ought to touch on before we, we run out of time. So, there's an awful lot of questions in the chat and in the comments about equality impact assessments, any discrimination risks. Can anybody comment on that? What does the government assessment say and, you know, are there risks there? Are these age discriminatory? Anybody want to just go through some of those issues?
Naomi Cook: There is, we believe, a requirement to publish an equality impact assessment. We believe there is an equality impact assessment but it has not yet been published. We assume that they're going to publish the EQIA, the directions and the guidance at the same time. As with all of this and we flagged it in our original response, we are concerned about legal risk to councils because for a lot of these things, as I think the questions indicate your thinking through as well. It's not obvious what the right answer is to some of this. So, we can't, at all, say that this-, that we think there won't be any legal follow-up to some of this. Whether that's JRs or whether that's individuals challenging once this actually, sort of, comes into effect. I imagine there may be a bit of both. I'm sure other organisations are looking at some of the legal ramifications of this and we'll have to wait and see.
As I mentioned, when Cabinet Office put the further reforms into the Civil Service compensation scheme, they were challenged at judicial review. I think that was on the consultation process, but it indicates that this is an area where that sort of thing might happen. So, yes, we, we are concerned that there are lots of different areas that expose councils to legal risk where basically they're just being caught up either between bits of legislation or by accidents of timing. And we are trying to get government to recognise that and mitigate that rather than aggravate it.
Sarah Ward: Really helpful. Thank you for that really comprehensive reply. Naomi, I fear that you're going to have to respond to this question as well, which is about whether or not there is any industrial relations impact and fallout from this? Can you tell us anything about trade unions are responding to these proposals?
Naomi Cook: Well, we understand that, certainly, the TUC and I fully expect the relevant LG unions as well, they all argued against the cap during the consultation process. We understand from a lot of the briefing that's happened and was evident at the Commons debate on Monday, I think, that unions are briefing MPs and I presume they will brief Lords and so forth as well. There are a lot of repercussions for them within the, sort of, context of the 95K itself. The other concern that we have is what it means for local discussions, particularly with the complexity of the discretionary waiver.
How that interacts with a council's capacity to reach a collective agreement around, say, a reorganisation or a redundancy process or, and so on, I think is going to be really challenging. And we'll be working through what advice and guidance that we can provide, as I say, once we eventually get the guidance and directions through. But that's an area which, where I think there will be a quite a lot of difficulties locally because of the tensions that, that the legislation, sort of, brings up, both for councils as employers, also for unions as collective and individual representatives.
Sarah Ward: Okay, that was really helpful. Again, thank you very much for taking us through thinking on those points. I'm just going to give the panel a, a, a quick final thought each. If there's anything that they want to say before we-, before we wrap this up. So, Phil. I'm going to come to you first of all. Anything you want to summarise or underline or just reiterate before we close today's webinar?
Philip Bundy: I suppose, yeah, it would be the point around until we know for certain how this is going to pan out, don't go making any guarantees to employees that the cap won't apply to them. I think you've just got to be really careful in that area. I suppose that would be the key point I would make.
Sarah Ward: And ladies and gentleman, if you didn't know that Phil was a lawyer, you certainly would have put that together after that point there. Thank you very much indeed for that. That's why he's very handy. Lorraine, what's your final thoughts, summary, advice before we go?
Lorraine Bennett: Just to say that we will, you know, we will be providing assistance and guidance to LGPS administering authorities. I can see that there's been a couple of questions come through about strain cost. That is going to be calculated by GAD (ph 56.28). They have got guidance ready to go and they were going to publish that with the draft regulations to accompany the MHCLG consultation. That was expected this week, but there's been a slight delay on it apparently. But, but it is GAD that will be providing the guidance and the actual basis for the standardised strain cost. So, yes, yeah, we'll do what we can, as soon as we can.
Sarah Ward: Thank you. Brilliant as always. And thank you for picking up that point too. Actually, I did notice somewhere else, earlier in the chat, somebody said where can I find all the information? So, Naomi, when you're giving us your final thoughts, give us the best place to direct somebody to who, who's looking for all the latest info on all this.
Naomi Cook: Yes, well if I knew that, I'd be logging on myself. So, yeah, we'll have more information on the LGA website on the workforce pages. In particular, there's an ERU, the employment relations unit, have a section on 95K. I'm sure, a, you'll find it or if you put it in the search engine will be there. The LGPS scheme advisory board as well has updates and guidance there, so that would be another place to look. And we will keep updating as and when information becomes available. In order to wrap up, can I thank everybody for your attention. We've had more than 500 people on this webinar, which I think means we all get an Equity card now. We will do more because I think it will be useful once we have the,the more information from government. But we wanted to do this early on because clearly, there was suddenly a lot of interest in the area and we wanted to be able to convey what we know and also let you know what we don't know. So, it's not that we're not telling you things, it's just that that information isn't available yet. But we will do more in the coming months as, as this rolls out. And as ever, we will provide as much support to, to councils as we can. Thank you.
Sarah Ward: Thank you very much indeed, Naomi. Yes, so colleagues and your, your final reminder. The slides will go onto the events section of the LGA website. That's where all webinar slides go. As Naomi said, we will do some follow-up webinars. There's been a number of comments coming in saying that's been helpful. Thank you for those lovely people giving us nice feedback. But if there are other ideas and suggestions as well, we're obviously always keen to hear from you. And we'll, we'll look how we can keep on sharing the information and making it as accessible as possible. So, we will keep doing that. And look out for other LGA events as well on the LGA events section of the website. Since we've been in this new way of working, we've been doing a number of webinars. It's been a really good way of being able to talk to lots and lots of people in one go so we'll do carry on doing that. We really enjoy reaching out and being able to interact with you in that way and I think, I hope that you find that works too. So, it just falls on me to say thank you very much to all three of our panellists, who I think you'll agree have, have taken a load of new information. There are things that we were discovering, you know, literally this week that they've been working really hard on to put all that together into one place and bring you it. It's really hot off the press, very complicated, complex information. So, we'll keep on translating and communicating that with you. Thank you to Naomi Cook. Thank you, Lorraine Bennett and thank you, Philip Bundy. Colleagues, thank you so much for your time and attention this afternoon. We wish you all well. Keep safe and we'll see you all, I hope, very soon. Bye-bye.
Watch our later exit payment reform webinar held on 6 November 2020, which includes information on what steps authorities may want to take in the interim period between the £95,000 exit payment cap coming into effect and the reform of the LGPS rules.