1. What is flexible
retirement?
1.1.
Flexible
retirement is a planned approach to retirement that enables
employees to phase down and draw from their pension early to offset
the reduction in salary. Phasing down could include:
§ Reducing working hours
and/or
§ Moving to a job on a lower
salary
1.2.
Employees who
are current active members of the Local Government Pension Scheme
may seek their employer’s agreement to draw their pension
benefits from the age of 55 and continue working on reduced hours
or move to a job on a lower salary.
1.3.
There must be
at least a 20% reduction in pay or hours for an employee to access
the flexible retirement scheme.Managers should consider
whether the new working arrangements meet the business needs of the
service, including retention of skills, experience, and succession
planning.
2.1.
Flexible
retirement enables employees to plan their retirement, financially
and socially to make a gradual adjustment towards the end of their
working life.
2.2.
Services also
benefit by retaining experienced staff with valuable skills. This
can better enable effective succession planning.
3.1.
To be eligible
for flexible retirement, employees must meet the following
eligibility criteria:
§ Be employed by the County
Council with a permanent contract of employment.
§ Be an active member of the
Local Government Pension Scheme.
§ Have reached the Normal
Minimum Pension Age, currently age 55.
§ Working to a reduction in
hours or pay of at least 20%
The scheme is not available
to employees on Teachers’ terms and conditions.
3.2.
Managers must
support an employee’s application with a business case
approved by their Assistant Director/Headteacher in consultation
with HR Advisory. The business case should include details of the
impact in service delivery and the benefit to the employee and
school or department.
3.3.
The Chief
Executive’s approval is required for applications for posts
at Assistant Director level and above.
3.4.
In the event a
manager does not approve an employee’s application, the
employee may request that the decision is reviewed in accordance
with the Flexible Working Requests
Guidance’s review process. There is no further right
of appeal and no other procedure, such as the Grievance Procedure, may be used.
3.5.
There is no
trial period for flexible retirement and, once it has been agreed,
the decision cannot be reversed, because of the direct impact upon
the pension benefits.
4.1.
In the event of
an employee reducing hours in the same job, all the conditions of
their contract of employment will be retained, including
recognition of continuous service for purposes of annual leave and
sick pay and for employment rights, such as redundancy payments and
unfair dismissal.
4.2.
If the employee
starts a new job, they will receive a new contract of employment.
Local government continuous service will be recognised for purposes
of annual leave and sick pay and for employment rights, such as
redundancy payments and unfair dismissal.
5.1.
Flexible
retirement enables employees to draw their pension benefits and to
continue working, either in the same job on reduced hours or in a
new job at a lower grade. There are, therefore, two sources
of income; pension benefits and income from employment.
5.2.
The annual
pension and lump sum retirement grant are paid with effect from the
date of flexible retirement and Additional Voluntary Contributions
(AVC’s) may be drawn if the employee so chooses. Pensions
benefits will be reduced if accessing them prior to normal pension
age, see Part 6.
5.3.
Employees
taking flexible retirement may contribute to the Local Government
Pension Scheme in the new or continuing part time job and accrue
further pension benefits within the LGPS that may be drawn
when they finally retire. It is important to note that the
new local government pension is a separate pension accrual.
This means that the previous service (relating to the pension put
into payment as a result of flexible retirement) will not count as
accrued service in respect of the later benefits. This might
affect entitlement to benefits such as ill health and could also
affect any safeguarded “Rule of 85” protections. (See
paragraph on “Rule of 85” below).
5.4.
Employees are
responsible for obtaining their own financial advice as the County
Council is not able to provide this to staff, but the following
information might be helpful:
§ flexible retirement will
have the effect of reducing salary and partially replacing this
with pension benefits. Depending on the level of salary
reduction and the amount of accrued pension benefits, the overall
level of income received during the period of flexible retirement,
or at the eventual date of retirement from the County Council,
might be less than that received by continuing to work in the
original contract until the LGPS standard retirement age of
65.
§ different inflation awards
are applied to pension benefits and salaries. This means that each
element will increase at a different rate throughout the period of
flexible retirement, whereas pay could increase more
overall.
§ the pension is treated as
taxable income and will, therefore, be subject to income tax
deductions, in the same way as salaries.
§ on reaching state pension
age, employees might become entitled to state pension benefits over
and above their local government pension benefits. There are
also some options in relation to state benefits – such as
deferring them so as to receive a larger state benefit later or a
lump sum.
6.1.
In most
circumstances, employees will experience a pension reduction in
accessing their pension as a result of taking flexible retirement
prior to normal pension age. Some employees’ pension may be
protected in part, by the ‘Rule of 85’.
6.2.
The ‘Rule
of 85’ was removed from the pension scheme from 1 October
2006, with some protection for those who had an expectation of
meeting it. This rule is satisfied when your age in whole years,
added to the length of your LGPS membership totals 85 or more at
the time of retirement.
6.3.
No reduction
will apply to those members who retire at or after their normal
pension age. Some pension scheme members will qualify for some of
their pension to be paid unreduced when retiring before the normal
pension, where they meet the transitional protection
arrangements.
6.4.
All pension
scheme members who joined before 1 October 2006 and could have
satisfied the ’85 year Rule’ prior to the age of 65
have some level of protection. Those who wish to retire when they
have satisfied the Rule of 85 and are beyond the age of 60 will
have the relevant protections applied when accessing their
benefits. However, those who satisfy the 85 year rule prior to the
age 60 and also retire prior to age 60 may have a reduction applied
to their otherwise protected benefits on account of them being
accessed prior to age 60 (the minimum retirement age at the time
the 85 year rule was in operation).
6.5.
East Sussex
County Council will not waive any pension reduction under the
flexible retirement scheme.
6.6.
The abatement
rules do not apply when employees draw their pensions under the
Flexible Retirement policy.
7.1.
As part of
regular supervision meetings, such as 1:1s and performance
appraisals, employees and managers/headteachers should maintain an
open dialogue about future aspirations, which may include the
option to take flexible retirement. The prospect of a contractual
change to access retirement benefits can then be discussed and
explored as part of a collaborative process.
Get estimates of pension
benefits
7.2.
Employees will
need to contact XXXX, who will obtain an estimate of pension
benefits. This will include any reduction to these benefits if
drawn before 65 years of age. Please note that only one request per
annum for an estimate of pension benefits will be made free of
charge.
Apply in writing
7.3.
Employees
should make a request for flexible retirement in writing to their
manager/headteacher using the Flexible
Retirement Application Form. This should include an
indication of a possible start date.
7.4.
Whilst there
needs to be at least a 20% reduction in hours or pay, managers will
need to consider the overall reduction and whether this is enough
particularly in the context of succession planning. The appropriate
amount of reduction will need to be mutually agreed.
7.5.
In cases where
an employee intends to move to a lower grade/salary, their line
manager will need to be aware of whether an alternative position
has already been secured or whether the employee needs to be
supported in the change to a different post.
7.6.
Managers must
meet the employee within 28 days of the request and notify the
employee of the decision to support the application or agree an
extension within 14 days of this meeting. An extension may be
necessary, for example, after a manager agrees to support the
request in principle but needs more time to look into the proposed
new working pattern.
Managers supporting the
request
7.7.
Managers
must:
§ confirm their support of
the request or any agreed adjustment to the original request in
writing to the employee, please see para 7.5.
§ complete the business case
section of the Flexible Retirement
Application Form. Please see below for more information on
supporting the application with a business case. The HR Advisory
Team can be contacted for advice and guidance.
§ send the Flexible Retirement Application onto their
Assistant Director/Headteacher for approval.
Preparing a business
case
7.8.
Each flexible
working case should be treated on a case-by-case basis and
supported by a business case that considers:
- The impact on service
delivery
- Succession planning
arrangements, to transfer knowledge and skills to
others
- How the employee will phase
down to full retirement eg. 3 day working for 2 years, then 2 day
working for 2 years, then retire completely.
- any other costs or savings
arising from the flexible retirement, for example, saving on the
employee’s salary, recruitment of a new employee, additional
duties payments made to other members of staff, avoidance of
redundancy payment.
Managers decline a
request
7.9.
Where a manager
decides that, due to the needs of the service, they are unable to
accept an employee’s flexible working request, they should
promptly meet with the employee to discuss the reasons and then
confirm these in writing.
7.10.Managers will need to refer
to the declining the request section in the Flexible Working Requests Guidance stating
the business ground(s) as to why the request cannot be accepted and
provide an explanation of why the business reasons apply in the
circumstances.
7.11.If the employee is
dissatisfied with this decision, they may follow the review process
outlined in the Flexible Working
Requests Guidance. No other procedure of the County Council,
such as the Grievance Policy can be used once this review procedure
has been exhausted.
