Voluntary redundancy and strain costs question

MakeMoneyWork

.Hi, I have recently been offered voluntary redundancy and have a question about how statutory redundancy rules may or may not apply. I am a member of the LGPS, aged 58 so am entitled to an immediate unreduced pension, which has generated strain costs.

My voluntary redundancy payment is £63,684.25 and my strain costs are £62,093.66, so redundancy payment will be £1,590.59 as I will be paying the strain costs out of my redundancy because that’s the company rules. I’m OK with this because of the benefits of an unreduced pension, but.

My question is, when someone takes voluntary redundant should they still be entitled to receive the minimum statutory redundancy payment regardless of strain costs?

Thanks

Nebulous2

You would be entitled to the statutory minimum redundancy, however you are receiving it surely?

It’s just that you are choosing to spend it on your pension. 

Have you taken advice on this? If you reached 60 then you are likely to have some protection, meaning your pension reduction would be limited. A possibility might be to take the redundancy, live on that, and defer your pension until you are 60. 

MakeMoneyWork

Thanks for the comments Nebulous2

Was more thinking that you have to end up with at least statutory payment in you bank account.

In LGPS scheme, if over 55 and made redundant you have to take immediate payment of your pension. I believe that may changing though. 

Clueless56

I understood it was the employer who paid the strain costs but note that you refer to 'company', so wonder whether your employer is affiliated to a local authority, rather than the LA itself - ?  That may make a difference.  I work for a LA and it is they who foot the strain costs for pensions paid under VR.  Have you seen the company's rules on this and are you in a union?  If so, I'd run it past them.  If not and you are able to, now may be the time to join.  Something doesn't sound right about this.  I realise that last December's ruling that was later shelved set the LGPS and employers re-evaluating how to deal with VR for the over 55s in future and your company may just have found a legal way to make the employee foot the bill.  

MakeMoneyWork

Hi Cluless56. It is the employer who pays the strain costs, but my employer has always clawed it back by taking it out of the voluntary redundancy payment. If the voluntary redundancy payment does not cover the strain costs then you would be unlikely to get voluntary redundancy as the organization would have to pay the extra. I'm in Unison and they have agreed the policy which I have read. This is not a new policy as a result of the shelved exit cap fiasco, its always been the policy.

Clueless56

Hi MMW, I'm sorry to hear that and suspect this will become more widespread and/or the requirement to take unreduced pension will be removed.  I don't suppose they'd pay enhanced redundancy to you on the basis that you're funding your pension strain costs?  VR doesn't appear to be an attractive proposition at your company.

MakeMoneyWork

The redundancy payment part is unattractive if your under 60 with high strain costs, the unreduced pension still makes it worthwhile though. Enhancements are not paid, that's also in the policy.

Clueless56

Perhaps it depends on length of service as well.  I am 60 and didn't want to 'settle' for unreduced pension when we recently had the chance to apply for VR even though I wouldn't have had to pay the strain costs and would have had enhanced redundancy pay.  I did the sums and decided I'd prefer to carry on working a while longer and have a larger annual sum in retirement.  It sounds as though your original post just set out the situation and that your redundancy pay will be c£1.5k.  

Have I gone off on a tangent?  Were you questioning whether the strain costs were correctly calculated?  If so, there's an LGPS administrator who often posts here.

MakeMoneyWork

Nothing wrong with tangents. I'm happy the numbers are correct, my main query is if anyone being made redundant by any route should, at the minimum, be entitled to the statutory redundancy amount. So in my case should the strain costs be clawed back only to the point where it would drop my redundancy payment to less than the SR payment.

Clueless56

Thank you    That's where perhaps the union could help - I would hope that they would have considered situations like yours and the legality of an employee's statutory redundancy money being almost entirely eaten up by strain costs before agreeing the policy.  I just had a quick look on the ACAS site and employers can clawback monies from statutory redundancy sums, though strain costs aren't expressly mentioned to rule them in or out.  Might be worth contacting ACAS for clarification - ?

MakeMoneyWork

Thanks. I can't find that on the ACAS site, would be grateful for a link to it