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So, where’s “mutual agreement” on this pension form?

Pensions and Employment speak different languages and as an employer it’s important to have a team working for you that understands both.

A recent example arose in the Pensions Ombudsman case of Mr. O (PO-7782).

Mr O worked for a local authority. Following an outsourcing and TUPE he was transferred to Capita Secure Information Solutions Limited. Unsurprisingly, Capita had some cost-cutting targets to meet and notified the Service Desk staff to say that there might need to be staffing reductions.

The staff in question were members of the Local Government Pension Scheme. This provides expensive-to-fund unreduced pension benefits where a member who is 55 or over:

• is made redundant;
• is dismissed on grounds of business efficiency; or
• leaves by mutual consent on grounds of business efficiency.

As Mr O was on sick leave at the time he agreed to a compromise agreement with a £25k payment in exchange for leaving his employment. In his case a pensions top-up would have cost Capita an extra £50k.

Capita had to fill in a form saying what the reason for Mr O’s departure was. This caused issues. Capita tried to say it was by “mutual agreement” but the relevant LGPS form didn’t have that as an option.

It then tried “redundancy” but realised this was an error (and would have triggered the pension benefits). It then ran with “resignation”. The Ombudsman looked at the facts, ran them against the only options available on the form and ordered Capita to resubmit it with “mutual consent on grounds of business efficiency” as the reason. Mr O got his unreduced pension costing Capita £50k and his £25k as well.

There’s always more to these things, but the key thing for this blog entry is to make sure you’re clear on what your pension scheme provides on leaving service. If you have any early retirement/redundancy provisions, they could leave you with an unexpected and very unwelcome bill even if you’ve got all your employment ducks in a row.

So, where’s “mutual agreement” on this pension form?

Its all change in employment law in April…

April is a key month for employment law changes and this April is no different. 6 April is “D-Day” for a number of significant changes. By way of reminder:

1 April

  • National minimum wage – the National Living Wage (for workers aged 25 and over) increased from £7.20 to £7.50 and there were also changes in the other bands.

Weeks commencing after 2 April

  • Cap on a week’s pay  – the cap on a week’s pay (which is used in statutory redundancy pay calculations for example) increased from £479 to £489.

5 April and onwards

  • Gender pay gap reporting – employers with 250 employees should have collated their relevant data on the first annual “snapshot date” yesterday. Today the work on calculations can begin! Private employers have a 12 month window (4 April 2018) before calculations must be published on the employer’s website and the relevant government website. Remember that public sector employers have a earlier snapshot date (31 March), their calculations need to be published by 30 March 2018 and every four years thereafter.

From 6 April

  • Unfair dismissal compensatory award – the statutory cap increases from £78,962 to £80,541.  Don’t forget that the cap will be one year of the employee’s gross salary if lower.
  • Apprenticeship levy – UK employers in the public and private sectors with annual wage bills of £3 million or more have to pay their monthly levy payments;
  • Immigration skills charge – employers who sponsor workers under tier 2 will have to pay £1,000 per year, or £364 if they are a small employer or a charity;
  • IR35 – new rules apply to public authorities paying personal service companies or other intermediaries. The public authority will need to make tax and National Insurance deductions as appropriate;
  • Salary sacrifice – relief on benefits in kind provided via salary sacrifice arrangements is being scaled back for benefits entered into from today.
Its all change in employment law in April…

New employment rates and limits

The new employment rates and limits for 2016/17 came into effect today, 6 April 2016.

Limit on a week’s pay £479
Maximum basic award for unfair dismissal or statutory redundancy payment £14,370 (30 weeks’ pay)
Compensatory award for unfair dismissal £78,962 or 52 weeks’ gross pay, whichever is the lower
Statutory Sick Pay £88.45 (no change)
Statutory Maternity Pay, Statutory Adoption Pay, Shared Parental Pay (prescribed rate) £139.58
Statutory Paternity £139.58


New employment rates and limits

Tribunal awards and statutory redundancy pay – annual increases

Where the event that gives rise to an award of compensation, e.g. an unfair dismissal or a redundancy, happens on or after 6 April 2016, new increased compensation or payment amounts will apply.

The limit on a week’s pay which is used to calculate statutory redundancy payments will increase from £475 to £479.

The maximum compensatory award for unfair dismissal will increase from £78,335 to £78,962. This remains subject to the cap on the compensatory award of 52 weeks’ pay.

Tribunal awards and statutory redundancy pay – annual increases