Cabinet Office mulls further cuts to exit pay and axing of early pension access in Compensation Scheme overhaul

Proposals, which come hot on the heels of Treasury plans to curb exit pay across the public sector, have already drawn fire from the PCS, FDA and Prospect civil service unions

By matt.foster

08 Feb 2016

The Cabinet Office is considering wide-ranging cuts to civil service redundancy payouts and an end to employer-funded early access to pensions, according to a consultation on the Civil Service Compensation Scheme (CSCS) published on Monday.

The CSCS was last overhauled in 2010 after long-running talks with civil service trade unions.

But, in a new consultation document, the Cabinet Office says it now believes the 2010 deal is “not fully delivering against its aims” and is encouraging staff facing redundancy “to hold on in the expectation of better terms later”.

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Instead, the department says it wants to shift incentives away from compulsory redundancy and towards voluntary exit schemes — although it makes clear that it is considering reductions in all three forms of civil service exit payout as well as early access to pensions, in a bid to drive down public spending. 

The Cabinet Office says the package of reforms will save “just over a third” on the current costs of exits and improve the ability of civil service employers to manage their workforces.

But the proposals have already drawn fire from the three main unions representing officials — with one accusing ministers of “political malice”.

The key changes suggested by the Cabinet Office document (available in full below) are:

  • A more than 25% cut in the tariff used to calculate exit payouts — and varying reductions in the years of service taken into account

There are currently three types of early departure from the civil service subject to payouts; voluntary exits; voluntary redundancies; and compulsory redundancies. At present, payouts under all three work out at a month's pay for every year served — known as the “tariff” — although the maximum number of months taken into account varies for each type of payout.

In line with the Treasury plans for the entire public sector workforce set out on Friday, the Cabinet Office says it is considering a cut in the tariff of more than 25%, to three weeks’ pay per year of service.  But the Cabinet Office appears to go further than the measures signalled by the Treasury last week in suggesting some steeper cuts to maximum payouts.

Staff opting to leave the civil service under voluntary exit schemes — used by employers to try and improve efficiency but entirely optional on the part of staff — are currently entitled to a month's pay for every year they have worked, up to a maximum of 21 months. 

But the consultation says staff choosing to take voluntary exit could instead be entitled to three weeks’ pay for every year worked, up to a maximum of 18 months.

Officials who leave the service under voluntary redundancy terms — when jobs are already at-risk and talks with unions have begun — are likewise entitled to a month’s pay for every year of service, up to 21 months. 

But the Cabinet Office floats the idea of reducing this to three weeks’ pay for every year, up to 12 months, creating a significant difference between the terms of voluntary exits and voluntary redundancies for the first time.

The Cabinet Office points out that “well over” 90% of voluntary exit schemes are on the same terms as those under voluntary redundancy, and it says the similar terms for the two forms of departure mean “staff generally will not come forwards for voluntary exit schemes unless they were already minded to leave”. 

“The government is therefore looking to increase the attractiveness to staff of leaving earlier in the process rather than waiting for the later stages,” the consultation says.

“The government recognises that there will be cases where redundancies (both voluntary and compulsory) will be necessary, but wants to incentivise voluntary exits to facilitate speedier exits and reduce the stress of redundancy situations where these are possible.”

The Treasury’s own consultation on the wider public sector workforce said it was looking to reduce the maximum period for voluntary redundancies to 15 months, meaning the Cabinet Office proposals for the civil service would represent a further reduction of three months' salary.

For those subject to compulsory redundancies, meanwhile, the current scheme entitles staff on whose future all other options have been exhausted to one month’s pay per year of service, up to 12 months. The consultation says that this could now be reduced to three weeks’ pay for every year, up to 9 months.

  • Ending or reducing employer-funded early access to pensions

Under the current CSCS scheme, staff close to pension age who have spent most or all of their careers in the civil service are  able to leave the workforce and claim an unreduced pension, in recognition of the fact that some will be unable to find new employment before reaching retirement age.

But the Cabinet Office says it “concerned that these provisions do not now appropriately reflect the ability of staff to draw their pensions, nor the growing reality of the length of working lives” — and puts forward proposals for removing the employer-funded top-up for early access completely.

This would, the consultation says, “save around 12% of costs”.

It adds: “The government is supportive of people being able to work for longer and to remain economically active until later in life and believes the scheme should be amended to reflect this changing position.”

Other options under consideration by the Cabinet Office are limiting employer-funded early access to staff who are within five years of state pension age; and limiting early access to those aged 55 or above.

  • Bringing in an absolute cap on CSCS payouts of £95,000

Measures to end “six-figure” exit payouts across the public sector were announced by the Treasury last year, and the Cabinet Office consultation makes clear that the new CSCS will take account of that £95,000 limit on payouts.

According to the Treasury, 1,050 central government employees took six-figure payouts in 2013/14. The department has previously said that the move “could result in savings in the low hundreds of millions of pounds over the course of this parliament”. 

The Cabinet Office says, under the reformed scheme, “any payments that would be more than £95,000 will be limited to £95,000”, although it says there will be “a mechanism” allowing ministers to break the cap “in exceptional circumstances”.

Unions have already questioned the wisdom of the £95,000 cap, warning that an absolute limit could undermine voluntary exits and drag in officials on more modest salaries who choose early access to pensions.


The Cabinet Office says the proposals will "align with wider compensation reforms proposed across the public sector"; "support employers in reshaping and restructuring their workforce"; "increase the relative attractiveness of the scheme for staff exiting earlier in the process"; and "create significant savings on the current cost of exits and ensure appropriate use of taxpayers' money".

However, all three of the main civil service unions — the Public and Commercial Services union, the FDA, and Prospect — on Monday night hit out at the Cabinet Office proposals, focusing much of their fire on the decision to revisit the CSCS just five years after the previous agreement. Prior to 2010, the terms of the scheme had not been re-opened since the 1980s.

Dave Penman, general secretary of the FDA union for senior officials, said a deal described by then-Cabinet Office minister Francis Maude as “affordable in the long term” had “been torn up just five years later”.

He added: “We have seen no evidence that this change is justified. Managing workforce reductions has been a civil service success story over the last decade, with most of the tens of thousands of staff who have moved on from the civil service leaving on a voluntary basis, thereby avoiding the need for compulsory redundancies. We believe that the proposed changes can only make managing future reductions more difficult.

“The FDA is seeking an urgent meeting with the Cabinet Office to discuss how any of the proposed changes can be considered appropriate, particularly given that exit programmes are underway in many departments and a Treasury consultation on public sector exit payments is also concurrently taking place.”

Garry Graham of the Prospect union for specialists said the 2010 deal had been “hammered out with Cabinet Office minister Francis Maude at the height of the financial crisis”, and accused the department of treating staff with “disdain”.

He added: “Our members are quite rightly asking what has changed. Revisiting this deal so quickly after it was signed raises doubts about whether public servants can trust this government to keep a promise.

“The absence of data and analysis in the Cabinet Office consultation document to back up its assertions is shocking. The Treasury consultation paper issued on 5 February has just one data source. The government’s documents are thin on evidence but heavy on prejudice.”

A PCS spokesperson meanwhile told CSW: “We’ve neither seen nor being told anything that changes our view that the previous scheme imposed by the coalition was designed to be long term and sustainable, and there is absolutely no reason to return to it. No reason, other than political malice.”

The Cabinet Office’s consultation, available below, runs until May 4. The Treasury’s separate consultation process meanwhile closes on May 3.

2016 02 04 CSCS Consultation Final Close 4 May

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