Planning for Retirement

When you retire, you can look forward to receiving a pension that increases every year in line with the cost of living for the rest of your life.

The normal retirement age in the LGPS is currently 65

However, there is scope to take benefits:

• From age 55 with employers consent and subject to their policy (Early or Flexible retirement)
• From age 60, subject to reductions if you have no transitional protections in place
• On the grounds of ill-health at any age
• Between age 65 and the day before your 75th birthday (Late retirement)

Your LGPS retirement benefits are made up of:

• An annual pension paid monthly, and
• A tax-free lump sum paid on retirement. (Only automatic for members with membership before 1 April 2008)

The two main factors used to calculate your retirement benefits are:

• Your membership in the Scheme, and
• Your final pay

How do I inform you that I’m retiring?

Your employer needs to tell us that you are retiring so we can calculate your benefits. Let your manager know as soon as you have decided on a retirement date.

Your employer should give you a retirement declaration form to complete and send to us.

To calculate and pay your pension, we must have:

• Your completed retirement declaration form.
• Final leavers information about your hours and pay from your employer.
• If you paid AVCs, its value paid to us by the AVC provider. This cannot be done ahead of retirement and may cause a delay of around eight weeks.

  

Early retirement

Early retirement is when you take your pension benefits before age 65.  You can take your pension benefits from age 60; subject to reductions, however:

• If you were a member of the scheme before 01 October 2006, some of your pension benefits may be protected from reductions; this is called the 85 year rule
• If you are retired on the grounds of redundancy or business efficiency grounds from age 55 benefits are payable without reductions
• Ill-health retirements also face no reductions

Reduction table

Years early	Pensions reduction % - male	Pensions reduction % - female	Lump sum reduction % - all members
1	6	5	3
2	11	11	6
3	16	15	8
4	20	20	11
5	25	24	14

 

Other options

• You can choose to retire at age 60 but not take your benefits until age 65 (or until your earliest retirement date). Your benefits then would be paid in full.
• Between and including the ages of 55 and 59 you may also elect to retire and receive your LGPS benefits, but only if your employer gives their consent as they may have to pay a special charge to the pension fund. These benefits may be reduced, but your employer can choose not to apply this reduction on compassionate grounds.

 

The 85 Year Rule

If you were a member of the LGPS on or before 30 September 2006, and retire before age 65, some or all of your pension benefits could be protected from the early payment reduction under what is called the 85 year rule.

You satisfy the 85-year rule if your age at the date you draw your benefits and your scheme membership (each in whole years) add up to 85 or more.

Working out how you are affected by the 85-year rule can be complex, but this should help you work out your general position:

 

Reach age 60 before 1 April 2016	Age 60 between 01 April 2016 and 31 March 2020	Age 60 on or after 01 April 2020
Benefits accrued up to 31 March 2016 will not be reduced No protections apply to post 2016 membership	Benefits accrued up to 31 March 2008 will not be reduced Benefits accrued between 1 April 2008 and 31 March 2020 - these benefits will have a partial reduction No protections apply to post 31 March 2020 membership	Benefits accrued up to 31 March 2008 will not be reduced No protections apply to post 31 March 2008 membership

 

Please remember that if you joined the LGPS on or after 1 October 2006, the 85-year rule does not apply to you. So, if you choose to receive your benefits before age 65 (other than on grounds of ill health, redundancy or efficiency), the full early payment reduction will apply to your benefits.

Normal Retirement

The normal retirement age in the LGPS is currently 65.

However:

• If you have at least three months' membership or have transferred pension rights into the LGPS, you can take early retirement from age 60, but your benefits may be reduced.
• If you are made redundant and are over the age of 55, you will be entitled to immediate payment of benefits
• If you are retired on the grounds of Ill-health you could receive immediate ill-health pension benefits at any age.

The Retirement Process

Your employer needs to tell us that you are retiring so we can calculate your benefits.

Let your manager know as soon as you have decided on a retirement date and allow up to three months for the process to be complete.

• Your employer should give you a Retirement declaration form to complete and send to us.

To calculate and pay your pension, we must have:

• Your completed retirement declaration form
• Final leavers information about your hours and pay from your employer
• If you paid AVCs, its value paid to us by AVC provider. This cannot be done ahead of retirement and may cause a delay of around eight weeks

Late retirement

Can I continue to pay into the pension scheme after age 65?

You can continue in local government employment and pay LGPS contributions after age 65.

In these circumstances your pension will be increased to reflect the fact that your pension will be paid for a shorter period overall.

Currently, the increases are 0.01% per day on your lump sum and 0.02% per day on your pension. These equate to 3.6% on the lump sum and 7.3% on the pension for every year you delay retirement after age 65.

Your retirement benefits must be paid by the day before your 75th birthday.

*** Please note that Flexible Retirement is subject to your employer’s policy; therefore this may not be available to all members of the scheme ***

Flexible Retirement

This is an option to draw your retirement benefits while you are still working, enabling you to ease into retirement.

To be eligible for Flexible Retirement you must

• Have at least 3 months’ membership of the Local Government Pension Scheme (LGPS) or, if less, have had a transfer of pension rights into the LGPS from some other pension arrangement
• Be age 55 or over
• Reduce the hours you work or the grade in which you are employed, in accordance with your employer’s policy
• Have your employer’s consent to take immediate payment of benefits despite your employment continuing

 

If I take Flexible Retirement how does this affect my pension?

Accrued pension benefits would be immediately payable from the date that is chosen to start flexible retirement.

On retirement you would receive:

• An annual pension of 1/60th of final pay for each year of membership which counts after 31 March 2008, plus
• An annual pension of 1/80th of final pay plus a tax-free lump sum of 3/80ths of final pay for each year of membership which counts before 1 April 2008.

There may however, be a reduction applied to your benefits to reflect the fact that they are being paid early.

If you were contributing to the scheme on 30^th September 2006 as a protected member, some or all of your benefits paid early could be protected from the reduction.

 

Can I continue to pay into the LGPS if I take Flexible Retirement?

• Yes. You would automatically be opted into a new period of membership, building up separate retirement benefits.
• You would remain in the LGPS unless you have given written notice to your employer that you wish to opt out.
• You can opt out of the LGPS at any time during your post-retirement employment but, if you want to leave with effect from day one of that employment and ensure that no pension contributions are deducted, you should give your employer advance notice of this.

 

Will any ’85 Year Rule’ protections apply to my continued membership?

No. If you retire before age 65 your benefits accrued in your continuing employment will be subject to reductions.  This may be a significant factor in your decision to take Flexible Retirement if you intend to retire before age 65.

 

Pension Increase

The flexible retirement pension will be “inflation-proofed” by increases applied under Pensions Increase Acts and Orders.

 

I have been making additional payments to increase my benefits. What happens to those if I take Flexible Retirement?

Added Years Contract (closed to members after 01 April 2008)	The contract will cease immediately before flexible retirement; you would be credited with the period of membership you had purchased at that date and this membership would be included in the calculation of your Flexible Retirement.  You should be aware that there is no option to continue this contract under your new period of membership.
Additional Regular Contributions (ARCs	The contract will cease immediately before Flexible Retirement; you would be credited with the pro-rated amount of pension you had purchased at that date and this pension would be included in the calculation of your Flexible Retirement.  You should be aware that these additional benefits will be subject to normal early retirement reductions. You do have the option to start a new ARC contract in your new period of membership.
Additional Voluntary Contributions (AVCs)	If you have been paying Additional Voluntary Contributions to a life assurance company through the Hampshire Pension Fund, these can be released on Flexible Retirement or you can continue payment if you remain a member of the LGPS in your new period of membership.

 

Where can I get more information?

Discussions about the possibility of Flexible Retirement should be with your employer. All retirement estimate requests must be requested by your HR/Payroll team and cannot be requested directly from you as the member.

You can reduce your hours or move to a less senior position and draw some or all the pension benefits you have built up – helping you ease into retirement. This is called ‘flexible retirement’

If you take flexible retirement before age 65, your benefits may be reduced to take account of their early payment unless your employer agrees to waive the reduction in whole or in part

You can continue paying into Hampshire Pension Fund on your reduced hours or in your new role, building up further benefits

Flexible retirement is at the discretion of your employer and they must set out their policy on this in a published statement. Your Human Resources department will be able to provide you will a copy of the policy. You will need your employer’s consent.

Your employer will pay an additional cost (strain charge) to Hampshire Pension Fund if they waive any reduction in your benefits.

Ill-health Retirement

If you have to leave employment for health reasons you need to contact your employer as you may be entitled to the immediate payment of your scheme benefits on grounds of ill health. These benefits could be subject to significant enhancement.

 

How pension entitlement is assessed on the grounds of ill-health?

If you have at least three months total membership or have brought a transfer value into the LGPS and an approved and independent registered medical practitioner certifies that:

• You are permanently incapable of carrying out your former job and
• There is a reduced likelihood of undertaking a job elsewhere

Further to this, your employer will decide which tier of ill-health to award. Details of the 3 tiers of ill-health are below:

Tier 3	Tier 2	Tier 1
If you are assessed as likely to undertake gainful employment* within 3 years then a pension is based on:	If you are assessed as unlikely to undertake gainful employment* within 3 years but likely to obtain gainful employment* before age 65 then a pension is based on:	If you are assessed as having no reasonable prospect of undertaking gainful employment* before age 65 then a pension is based on:
Accrued membership only The Third Tier member is required to notify the previous employer when employment is found - providing details, including the pay and working hours of that employment. The employer considers the details regarding employment and, if they decide this is gainful employment according to the regulations, payments are stopped. The previous employer needs to undertake a review when Third Tier payments have been made for 18 months. The 18 month review could result in cessation, continuation or uprating to a Tier 2 depending on the outcome of your visit to occupational health	Accrued membership plus 25% of prospective membership between leaving and age 65 For part-timers, this period of extra membership is scaled down in proportion to part time hours worked at date of leaving against full time equivalent hours at that date. This is payable for life and is not reviewed in the same way as a Tier 3 ill health but may be subject to abatement if you are re-employed within local government.	Accrued membership plus 100% of prospective membership between leaving and age 65 For part-timers, this period of extra membership is scaled down in proportion to part time hours worked at date of leaving against full time equivalent hours at that date This is payable for life and is not reviewed in the same way as a Tier 3 ill health but may be subject to abatement if you are re-employed within local government.

*gainful employment is defined as 'paid employment for not less than 30 hours per week for a period of not less than 12 months.'

Want more information?

If you would like more information on ill-health retirement, you should contact your employer in the first instance who can provide you with more details including their processes.