Bishop of Worcester: Government plans to cap public sector payouts will have negative effect on pensions of lower paid

On 23rd September 2020 the House of Lords was asked to approve the Government’s Restriction of Public Sector Exit Payments Regulations 2020. The Bishop of Worcester, Rt Revd John Inge, spoke in the debate, highlighting the negative consequences of the Regulations for the pensions of longstanding and lower paid public sector workers:

The Lord Bishop of Worcester: My Lords, the attempt to address egregiously large public sector exit payments is undoubtedly a good thing and I applaud it. However, to enact regulations without attention being given to unintended consequences for lower-paid staff is surely not.

Reference was made by the noble Baroness, Lady Bakewell, to the LGA’s concerns with the regulations as drafted. The LGA believes that employees in scope of them could be earning far less than the Government have suggested. I am standing up because individuals in my diocese have expressed grave concern about this. They are frightened because pension strain is included in the £95,000 cap, as has been mentioned. The regulations could have lasting negative impacts on long-serving staff who do not earn large sums of money. The Minister mentioned cases of genuine hardship, and I would be pleased to hear what he means by that.

As the noble Earl, Lord Devon, made clear, in these economically uncertain times pension strain is particularly significant, as large numbers of public servants only a few years below pensionable age are increasingly likely to be made redundant. These regulations could penalise low-paid, long-serving, loyal public servants.

When the Scottish Government implemented similar regulations, they intentionally opted not to include pension strain payments, stating that

including employer pension costs in any severance payment cap may unduly expose longer-serving and lower-paid employees to the cap”,

and that they have

therefore decided to exclude these costs from the cap.”

Following in Scotland’s footsteps might be a positive way forward in protecting lower wage earners at the heart of our public services.

It is of course right that high exit payments are brought to acceptable levels. However, it is surely vital that proper attention is paid to the unintended consequences that these regulations could have for lower-paid public servants who have dedicated decades in local authorities and public bodies to the common good. I would welcome any clarifications or assurances that the Minister is able to give.

Lord Agnew of Oulton (Con) [extract]:  The right reverend Prelate the Bishop of Worcester is concerned about lower-paid people. The guidance document outlines situations where the waiver system may be used. It explicitly states that the discretionary waiver may be exercised with the approval of the sponsoring department and the Treasury if capping a payment would result in genuine hardship…

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