Flexible retirement

Flexible retirement, sometimes referred to as phased retirement, is where the employer agrees to allow a member to draw all or some of their retirement benefits (pension and lump sum) even though their employment continues.

All other retirements require the member to leave employment before claiming his or her pension.

Flexible retirement can enable the member to access their pension before their normal pension age. The pension to be paid may be reduced; therefore employers also have to consider under what terms any reduction may be waived.

Flexible retirement process

• the employer must have a flexible retirement policy.  The policy outlines the employer's conditions and approach to flexible retirement, including whether/when they will waive any early retirement reduction.
  • the member discusses flexible retirement with their employer.
    • the member must be an active (contributing) member of the LGPS.
    • the member must be aged at least 55 with at least two years in the scheme at the flexible retirement date.
    • the member must have a reduction in their pay coinciding with the flexible retirement date. The reduction in pay could be a reduction in contractual hours or a reduction in seniority.
  • if approved by the employer, the employer notifies Pension Services of the retirement decision and the new employment details on the Flexible Retirement Notification form
  • Pension Services processes the Flexible Retirement
  • the employer pays any ‘hidden cost’ or pension strain resulting from the flexible retirement.
• the form will confirm the leaver details for the member’s employment before flexible retirement, allowing benefit calculation and the contractual arrangements of the member’s employment after the flexible retirement.
• there is no need to complete Leaver information on i-Connect as the Flexible Retirement Notification Form collects all the required information.

Remember, you may need to reassess the member's contribution rate on the continuing job!

Appeals

Any member of the LGPS scheme can appeal against any decision made by an employer including whether or not the flexible retirement application is approved. This alone makes it necessary to have a good flexible retirement policy in place.

You can find more information about the process and download an application form.

Frequently asked questions

How long does the reduction in pay have to be applied for?

That is entirely up to the employer, but if limited, it should ideally be part of the flexible retirement policy. Some employers have set out a minimum pay reduction and a minimum period for which this reduction has to be applicable.

Does the member have to continue paying into the scheme?

The LGPS is not compulsory. The member doesn't have to continue paying into the scheme after taking flexible retirement. However, the member is automatically in the scheme until they opt out, so will remain a member of the LGPS until they have completed and sent the opt-out form to the employer, which would apply for the next pay period.

If the member does not send in the opt-out notice in time to stop the first month's deductions after flexible retirement, the member will benefit from the small amount of pay in their new employment arrangements. This is because the member is in the same employment and has already passed the LGPS vesting period for benefit entitlement.   This means no refunds should be paid to the member for their continuing pension arrangement.

Please note: the member could elect for the 50/50 section.

Does a drop in pay satisfy Regulation 10 criteria (final pay protection for a reduction in pay)?

No. Reductions in pay due to flexible retirement are specifically disregarded in Regulation 10.  Also, please note, Regulation 10 protections can only apply to members with pre-April 2014 membership, where membership preserves the final salary ‘final pay’ links.

Will the pension in payment reduce or stop if the member’s pay increases by increasing hours or promotion?

No. Pension fund abatement rules do not apply to the ongoing pay after flexible retirement.