SRP Abatement and Pension

Hi d.p.,

I think your views are close enough. Generally when an employee was made redundant and a decision was taken (either by the employer or the employee) to make it early retirement at the same time an adjustment was made to the pension lump sum so that they did not benefit from both lump sums. It usually affected public sector workers and in some cases was written into the pensions scheme rules.

What made it ridiculous and unworkable was the introduction of personal pensions in 1986 where a worker could get both their redundancy and take any lump sum they wanted from their pension scheme and no one could do anything about it. It created an unfairness and inconsistency of treatment but, as you say, it really wasn't removed until recently.

The issue of October 2006 is slightly different in that to comply with age discrimination laws the reduction of redundancy payments at age 64 was removed by 1/12th for each completed month after attaining 64 until the right to a redundancy payment became nil at state retirement age. Nevertheless you are right though the practice is a little more complex than you mention.

The fact is that even prior to 65 a worker could claim a redundancy payment and to comply with the law the employer had to calculate it properly. The right to a physical payment however was diminished by the abatement rule which reduced the payment to nil in the run up to SPA. So they had a right to it but eventually the right was to a nil payment, make sense?

Anyway, as you say, since October 2006 employees have completely separate entitlements to pension and redundancy and we do not interfere with any one of them anymore.

Payrollpro