Lynda Jones

Head of Branch 3

Local Government & Fire Pension Schemes

2/G9 Ashdown House

123 Victoria Street




Direct line: 020 7944 4317

Fax : 020 7944 6019


e-mail: [email protected]


Web sites :




8 November 2006











Dear Sir or Madam




The Local Government (Early Termination of Employment) (Discretionary Compensation) (England and Wales) Regulations 2006 (SI 2914)



I enclose Regulations which the Secretary of State has made under powers contained in section 24 of the Superannuation Act 1972. These Regulations replace the Local Government (Early Termination of Employment) (Discretionary Compensation) (England and Wales) Regulations 2000 (“the 2000 Regulations”), giving local government employers powers to consider compensation payments to employees whose employment is terminated early by reason of redundancy, in the interests of the efficiency of the service, or, in the case of a joint appointment, because the other holder of the appointment has left it.


They come into force on 29 November 2006 and have retrospective effect from 1 October 2006.


The new provisions provide local government employers with powers to consider making a one off lump sum payment to an employee which must not exceed 104 weeks’ pay.


The Regulations no longer provide for the award of compensatory added years but local government employers are reminded that they may still augment a member’s local government pension by virtue of regulation 52 of the Local Government Pension Scheme Regulations 1997. The augmentation provisions under the Scheme were amended from 1 April 2004 and allow employers to award a member an additional period of membership at any time during active membership of the Scheme. Employers should already have their discretionary policy on augmentation which, of course, does need to be reviewed under the terms of the existing provisions in the 1997 Regulations.


The Regulations contain transitional provisions to the end of the current 2006/7 financial year which means that an employer can choose to use either the 2000 regulations or the 2006 regulations for a person whose employment with them commenced before 1 October 2006 and whose termination date is on or after 1 October 2006 and before 1 April 2007. This means that an employer may make an award of compensatory added years to any employee whose employment terminates before 1 April 2007.


In addition, although the Regulations are to have effect from 1 October 2006, because they are retrospective, an employer who decides to make a compensation award in respect of someone whose employment terminates before 29 November 2006 should do so in accordance with their published policy for the period before 1 October unless the employer can be sure that making a lump sum award under the new provisions will not be less favourable to the individual concerned.


Employing authorities also have the option to increase a lump sum award to the new 104 week maximum where, because of the delay in implementing the 2006 Regulations, an employer could only have made an award of up to 66 weeks’ pay under the 2000 Regulations but would have made an increased award had the 2006 Regulations been in force.


The Regulations continue to require each local authority employer to formulate, publish and keep under review their policies on compensation as appropriate so that local and accountable value for money and transparency principles are clearly demonstrated to taxpayers and auditors. In formulating their policies, employers will wish to consider the interests of all local stakeholders, involving them in early discussions wherever possible.


During the consultation process, it was suggested that the effectiveness of the new Regulations should be gauged over the coming months. It has been agreed by Ministers that the Department for Communities and Local Government will chair a group that will monitor how the new regime is being put into practice at local level. The Compensation Regulations Monitoring Group (CRMG) will comprise representatives from the DCLG, the Local Government Employers, personnel specialists and trades unions. The Group’s terms of reference will involve considering evidence on the operation of authorities’ policy statements; the effectiveness of the current maximums for the lump sum payments and augmentation under Regulation 52 of the Local Government Pension Scheme. Feedback from local authorities and other stakeholders will be welcomed by the Group in the course of its work, including examples of policy statements established under the compensation regulations.


Any comments or questions relating to the application of these changes and the development of CRMG should be addressed in the first instance to Philip Perry, Local Government and Fire Pensions Branch 3, DCLG, Zone 2/F6, Ashdown House, 123 Victoria Street, London SW1E 6DE

(e-mail: [email protected]  , phone 020 7944 4137).




Yours faithfully,






Lynda Jones