Flexible retirement, sometimes referred to as phased retirement, is an agreement between the employer and the member to allow the member aged at least 55 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 may be a useful tool to help with the management of an ageing workforce or to retain skills.

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.

Example

Requirements for flexible retirement

• The policy statement. The employer must have a flexible retirement policy.  The statement outlines the employer’s conditions and approach to flexible retirement, including  whether/when they will waive any early retirement reduction.
• The member’s request  for flexible retirement must go to the 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.
• The employer must now notify Pension Services of the retirement decision and the new employment details on the Flexible Retirement Notification form
• You can use this for as an early notification.
• The employer must pay any ‘hidden cost’ or pension strain resulting from the flexible retirement.

Without these requirements, we cannot pay the pension .

This 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.

Do not complete the 'MARS' starter and leaver tabs following flexible retirement. 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 have to be applied for?

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

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. However, the member is automatically in the scheme until they opt out, therefore the member will automatically 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 have a benefit for  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. Any pension fund abatement rules do not apply against the ongoing pay after flexible retirement.