Flexible retirement helps employees ease into retirement by allowing them to work part-time while starting to draw on their pension benefits. This arrangement is made between the employee and the employer.
As an employer, flexible retirement may enable you to retain valuable skills and knowledge, whilst allowing the employee to start to claim their pension benefits as they continue to work.
A scheme member who is age 55 can take all or part of their retirement benefits (both pension and lump sum) even though they have not retired providing that:
- the employer consents, and
- there has been a reduction in hours, or
- a reduction in grade.
Discussing flexible retirement with your employee (consent and discretions)
If an employee is considering flexible retirement, they should first talk to you to get your consent.
The pension they’re entitled to might be reduced based on actuarial reductions, but as their employer, you can choose to waive some or all of this reduction. This decision will incur a Strain on Fund cost, which must be paid within 2 weeks of its issue.
As an employer it is a legal requirement that you publish formal policies on the discretions that you have under the LGPS regulations. This includes how you would deal with a request for flexible retirement. Your decision must be in line with your discretions.
Please check your discretions policy for flexible retirement. If your discretions are missing or need amending, the discretions tool can be used to make any changes. Please contact the employer relations team if you require any assistance preparing or updating your discretions.
Find out about discretionary policies.
How to process a flexible retirement
Requesting an estimate for pension benefits and strain cost calculation
It is important that before processing an employee leaving because of flexible retirement that a pension benefit estimate and the strain costs is obtained.
You can apply for an estimate by completing the online application form and uploading to the employee’s i-Connect record, you need to indicate on this form if actuarial reductions are to be waived.
Apply for a flexible retirement estimate
Avon Pension Fund would then provide you with an estimate via GlobalScape, this would include a summary of the benefits payable to the employee and any strain on fund cost incurred.
You must pass this information on to the employee and discuss their options before taking further action.
If you and your employee agree on the terms for flexible retirement you must inform the Fund as soon as possible by completing the online leaver form for flexible retirement and uploading this to the employee’s i-Connect record.
Flexible retirement leaver form
What happens next
- You will receive a confirmation email from the Fund confirming the reason for leaving – if this is correct then no further action will be required.
- Avon Pension Fund will send a pension pack to the employee. This pack includes all the necessary forms to put their pension into payment. The employee needs to complete and return this paperwork to us.
- When the pension has been put into payment you will be sent a Strain on Fund invoice – this must be paid within 2 weeks of its issue (if this payment is late, interest will be added at the rate of 2% above then the current Bank of England Base Rate).
- You need to report the employee’s new reduced hours or lower grade position in your monthly return through i-Connect.
- The employee will be automatically enrolled in the pension scheme for their new position, but they can choose to opt out. You must not give them an opt-out form, you can direct them to the member website for more information.