UK: Reform Of The Civil Service Pension Scheme

Last Updated: 19 October 2016
Article by Pete Miles

On 8 February 2016, the Cabinet Office published a consultation on proposals to reform the Civil Service Compensation Scheme (the "CSCS").

The first phase of the consultation process has now completed and the Cabinet Office has published its response to it.

The Cabinet Office is intending to press ahead with reforms that, among other things, will change the way that compensation is calculated under the CSCS.

What is the CSCS?

The CSCS provides the statutory framework for the provision of compensation to civil service employees who are redundant or who accept "voluntary exit" terms.

Under the terms of the unreformed CSCS, employees are entitled to receive a lump sum compensation payment and the amount of that payment will depend upon the circumstances in which the employee has exited the civil service.

The three exit categories covered by the CSCS are (i) Voluntary Exit (ii) Voluntary Redundancy and (iii) Compulsory Redundancy (each an "Exit Category").

Ordinarily, the amount of the compensation payment is one month's salary for every year of service (the "Multiplier") up to a maximum number of months (the "Cap") which varies depending on the Exit Category that applies.

In addition, where an employee:

  1. has two years' service in the Principal Civil Service Pension Scheme (the "PCSPS"); and
  2. has reached his minimum pension age in the PCSPS (50 or 55 depending on when the employee joined the PCSPS) but has not reached his Normal Retirement Age,

he may retire early and use his compensation payment to "buy out" the actuarial reduction that would ordinarily have been applied to the amount of his pension (to reflect the fact that it will be paid for longer).

In order to encourage employees to accept Voluntary Redundancy terms, this "buy out" of the actuarial reduction is employer-subsidised in circumstances where an employee has accepted Voluntary Redundancy and the employee's compensation payment is insufficient to meet the cost of the buy-out.

Rationale for proposal to reform the CSCS

The Cabinet Office has identified a number of principles that are driving the reform proposals. In particular, reform is being pursued with a view to:

  1. aligning the CSCS with other compensation reforms proposed across the public sector;
  2. supporting employers in reshaping and restructuring their workforce;
  3. increasing the attractiveness of early staff exits;
  4. saving a third on exit costs; and
  5. ensuring that early access to pension remains appropriate in the context of employees remaining economically active for longer.

Reform options

The consultation asked respondents to consider and comment on a variety of proposals to reform the CSCS.

In relation to compensation payments, the key question was whether the Multipliers and the Caps used to calculate compensation payments should be reduced.

On pensions, the Cabinet Office asked whether it should amend the CSCS so as to:

  1. remove employer-subsidised early retirement completely; or
  2. increase the age at which an employee may elect to receive an employer-subsidised early pension to the minimum pension age in the PCSPS applying to members who join the scheme at that time; or
  3. restrict the entitlement to employer-subsidised early retirement to employees who are within five years of state pension age.

Response to the consultation

The majority of respondents were opposed to the reform proposals.

In relation to the pensions aspects of the proposal, respondents acknowledged that while many ex-civil servants remain economically active into their 50s, it could be more difficult for over 50s to get another job if they are made redundant.

Accordingly, the majority of respondents felt that the current pension aspects of the CSCS remain appropriate and fit for purpose.

Key reform proposals

Notwithstanding that the majority of respondents opposed the reform proposals, the Cabinet Office intends to press ahead with reforms on the basis that savings have to be made to make the CSCS more affordable.

That said, the Cabinet Office wishes to proceed on the basis of a package of reforms that has the support of the majority of the trade unions representing staff covered by the CSCS.

Accordingly, the Cabinet Office has made a formal offer to the trade unions for them to consider.

In summary, under the terms of the offer, compensation payments will be reduced in respect of each Exit Category by:

  1. changing the Multiplier from one month's to three weeks' salary for every year of service; and
  2. reducing the Cap by three months in respect of each category.

In relation to pensions, the terms of the offer are as follows:

  1. employer funded un-reduced pensions will only be available from age 55 or 10 years behind the employee's state pension age, whichever is later;
  2. employees who are above minimum pension age may partially buy out the actuarial reduction where the value of the redundancy payment is insufficient to buy it out fully; and
  3. employees who are above minimum pension age may partially buy out the actuarial reduction where the full redundancy payment is subject to legislative restrictions (e.g. the introduction of a cap on exit payments).

If this offer is not accepted by a sufficient number of trade unions (as determined by the Minister), the Cabinet Office intends to implement reforms on a less generous basis by:

  1. reducing the Caps applying to Voluntary Exit and Voluntary Redundancy by an additional three months; and
  2. omitting options (ii) and (iii) above from the pensions proposal.

Other aspects of the reform proposals

The Cabinet Office has also announced an intention to:

  1. increase the amount of the "lower paid underpin" that applies when calculating compensation payments;
  2. align notice periods as between the three exit categories so that three months' notice is required in each case (it is currently six months in respect of Compulsory Redundancy); and
  3. implement a revised Protocol for Civil Service Redundancies to speed up the exit process.


The Cabinet Office has said that it will take a final decision on the reforms to be implemented once it has received the considered response of all of the trade unions.

We will provide a further update once a final decision has been made.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions