The Government has announced that all public sector employees, who leave their employment as part of a redundancy or early leaver scheme, will be subject to a cap on the value of any payments made to them by their employer. The cap will be set at £95,000 and includes all payments relating to the employee’s contract termination. In respect of the teacher's pension this will mean that mandatory and discretionary payments towards premature retirement compensation will be included in the assessment of the  exit payments made to an individual.

The Department for Education will provide a further update on the impact to the Teachers' Pensions Scheme once it has had the opportunity to assess the proposals being put forward by HM Treasury.  It is expected that the necessary legislation for the cap on public sector exit payments will be made soon.

HM Treasury will also provide a definition of a public sector employer, from which it will be possible to identify the scheme employers who will be subject to the cap. This legislation will not therefore apply to any scheme employer that falls outside the definition to be provided.