Leaving Toolkit - Flexible Retirement

Summary

This sets out how the Council manages FlexibleRetirement arrangements in line with the Council Local Government Pension Scheme (LGPS)Discretions Policy. This applies to all employees employed by the Council and maintained schools in Hertfordshire who are a member of the Local Government Pension Scheme. Academies and Free School must have a discretions policy and may wish to follow the policy set by the council.

Flexible Retirement

Flexible Retirement is an arrangement whereby an employee who is a member of the Local Government Pension Scheme (LGPS) who is aged 55 or over can be granted early access to their pension whilst remaining in employment for a limited period, in the same ora similar role, with a minimum reduction of 30% of costs (usually reduction in hours or grade) and retains continuous service with the council.

The granting of Flexible Retirement is an employer led initiative and it is entirely at the discretion of the employer via the Council LGPS Discretions policy to offer it. Flexible Retirement is only offered on an exceptional basisand can only be agreed by the HCC Assistant Director, HR who has delegated authority to approve the Council use of its discretions. It will only be agreed where there is a clear business benefit to the organisation and where any foreseeable costs are offset by the reduction in grade and/or hoursand where it has an agreed end date.

Flexible retirement discretion should not be used in place of redundancy, capability or ill health procedures.

Eligibility

To be eligible to be offered flexible retirement an employee must be:

A member of the Local Government Pension Scheme
Aged 55 or over
Be in a shortage skill area/ role and /or have skills and experience the Council need to retain or cannot easily / quickly replace without a transition plan over a period of up to 2 years.
Planning full retirement in the near future

Members of other Public Sector Pensions (i.e. Fire/NHS/TPS) can find further information on similar arrangements in their scheme specific websites.

In order for a flexible retirement to be agreed, there must be a proposal in place that reduces employment costs by a minimum of 30%. This can be done byreducing hours ormoving to a lower graded post with work being re-allocated. This is to ensure any additional costs of granting Flexible Retirement can be off set against these savings.

Flexible Retirement can be costly to the Council(and in turn the school were costs are passed on) so is only offered and agreed in exceptional circumstances. Examples of costs incurred include;

1)Pension Benefits - this consists of an employeepension and may include a lump sum retiring allowance, detailed on the pensions estimate supplied by Local Pension Partnership (LPP) who administrate the LGPS for the Council.

2)Strain/Capital Costs - these are the additional pension costs of early retirement (i.e. paying out the pension earlier and for longer) that are charged to the employing department

3)Ongoing Salary and on costs (National Insurance etc.)

4)Hidden Costs- reductions in investment returns as pension paid out early, due to money being removed from pension fund.

Timescales

Flexible retirement should only be used as a transition period into full retirement, and should therefore be for a short period of time only – as a guide - no longer than 2 years.

Therefore part of the business case should be a plan as to how a transition of skills and experience will take place to reach a point when full retirement can be achieved.

Terms of Agreement

All employees who are offered and have aFlexible Retirement arrangement agreed will be required to sign an agreementsetting the terms of the Flexible Retirement arrangement. This will include;

An agreed date for the end of the arrangement where the employee will resign and retire fully.
An agreement that at no time within the Flexible Retirement period will the employees hours or grade be increased, accept in line with normal cost of living or Performance related increment (PRI) awards.

Breaks in Service

If flexible retirement is granted, no break in service is required. An employee can begin to draw their pension and continue to work from an agreed date. Note that this will not create a break in service which will mean employees continue to be entitled to equivalent benefits.

IndependentAdvice

If an individual chooses to retire before their normal retirement age the pension benefits they receive will be reduced in value to accommodate for the extra years of payment. Once pension payments start they cannot be ceased.

All employees should therefore seek independent financial advice before accepting an offer of flexible retirement.

Unauthorised Retirements

Under no circumstancesshould an employee be allowed to retire and draw their full pension with an ‘arrangement ‘of returning to their old post or another post without going through the correct flexible retirement process. Any manager or employee found to be involved in setting up/agreeing such an arrangement will be addressed in accordance with the relevant disciplinary policy.

There may be circumstances where an employee does fully retire and later wishes to return to employment. In this instance any re-employment must follow HCC’s recruitment process, and be subject to a proper and open competition process.

Returning to work after starting to draw a pension may result in abatement of the pension in payment. Abatement rules relate to members with pre-2014 LGPS pension benefits. This rule sets out that, if the sum of the pension and the salary in the new employment exceeds the final rate of pay for the employment the pension was based on (uplifted with index-linking if there was a gap between retiring and returning), the excess pension is suspended for the duration of the re-employment.

Appeals

If an application for Flexible Retirement is rejected the employee should be notified in writing of the reasons for this decision. An employee can appeal the decision though the Councils Internal Disputes Resolution Procedure (IDRP). To appeal they must contact the pension scheme administrator, the Local Pensions Partnership (LPP) who will provide the forms to appeal.

Flexible Retirement (FR) Process Flowchart