LGPS, Voluntary Redundancy and Strain Costs 22 August 2021 at 9:13AM in Redundancy & redundancy planning 7 replies 541 views

MakeMoneyWork

Is it common practice for employers to expect staff leaving through voluntary redundancy to pay any LGPS strain costs out of their redundancy payment?

Silvertabby

This just started to be 'a thing' during my time as a LGPS administrator, usually with smaller employers who don't have the funds to pay redundancy AND strain costs.

Things may have changed over the past few years, but the handful of cases I dealt with were voluntary (as opposed to compulsory) redundancy,  as seems to be the case here.

MakeMoneyWork

Hi Silvertabby. Yes I have been offered voluntary redundancy. My rounded up figures are VR £63,500, Strain costs £62,000. This means my actual VR payment is £1,500. Of course I get an unreduced pension and lump sum which is good. I guess if my organisation had to pay the VR and SC themselves then it would cost them £125,500 and I would not have received a VR offer at all. The procedure is explained in our Redundancy Policy so not a surprise, just wondered if it was common practice.

Silvertabby

MakeMoneyWork said:

Hi Silvertabby. Yes I have been offered voluntary redundancy. My rounded up figures are VR £63,500, Strain costs £62,000. This means my actual VR payment is £1,500. Of course I get an unreduced pension and lump sum which is good. I guess if my organisation had to pay the VR and SC themselves then it would cost them £125,500 and I would not have received a VR offer at all. The procedure is explained in our Redundancy Policy so not a surprise, just wondered if it was common practice.

Apparently, it's getting to be so, particularly with the smaller employers.  

MakeMoneyWork

I work for an arms length government body in Wales with 2300 employees so I guess everyone will be doing it soon as it saves a lot of money

PaulWid

Are you able to disclose the Council your work for please or perhaps copying and paste the part of the RP that details this procedure. Thanks.

MakeMoneyWork

Prefer not to name the body i work for sorry. This the gist of the policy· If there is a pension strain cost to the employer, this is paid for out of your VR payment.  If VR payment is not sufficient to cover the pension strain then we as the employer will pay the difference. If the pension strain is less than the redundancy payment then the individual gets the remaining VR payment.

Thrugelmir

MakeMoneyWork said:

I work for an arms length government body in Wales with 2300 employees so I guess everyone will be doing it soon as it saves a lot of money

Many such bodies are running unfunded pension schemes with sizable liabilities. VR is an attempt to cap these.