The Government plans to bring its proposed £95,000 cap on public servants' exit payments into force before the end of this calendar year, The MJ understands.

Its move comes despite warnings that capping exit payments will undermine the incentive for large numbers of employees to leave and result in long-serving middle earners receiving reduced pensions on redundancy.

A report to the local government pension scheme advisory board read: ‘As the cap includes pension strain costs the restriction will seriously limit councils' ability to restructure management levels by consent, thereby impacting on the business case for such restructures.

‘The process by which councils may secure an exemption from applying the cap is cumbersome, contradictory and significantly restricts the ability of councils to manage their own finances.

‘The administration of the cap will be complex for pay and pensions teams and confusing for employees and likely to result in increased tribunal cases and greater difficulty in reaching agreements on redundancy schemes.'