Voluntary redundancy from LGPS (Scotland) at age 54

billm

Hi, 
my wife has the opportunity to take voluntary redundancy from LGPS in Scotland, but is only 54. Am I correct in thinking if she does take voluntary redundancy, as she is under 55, her pension will not be paid immediately without actuarial reduction, and will become deferred?
If she then decided to take straight away, some of her benefits will be protected under 85 year protection, but would still I imagine have a significant reduction if paid early.
Thanks

Silvertabby

billm said:

Hi, 
my wife has the opportunity to take voluntary redundancy from LGPS in Scotland, but is only 54. Am I correct in thinking if she does take voluntary redundancy, as she is under 55, her pension will not be paid immediately without actuarial reduction, and will become deferred?
If she then decided to take straight away, some of her benefits will be protected under 85 year protection, but would still I imagine have a significant reduction if paid early.
Thanks

Yes, exactly that, assuming that by 'taken straight away' you mean once she reaches 55.

However, note that Rule of 85 is still linked to the old rules minimum retirement age of 60, so even her pre 2008 benefits would be reduced for early (5 years) payment. 

billm

That's what I thought. Thanks for clarifying.
Oh well, looks like she needs to hang on for another 6 months or so until she is 55 and hope they offer it again.

Silvertabby

billm said:

That's what I thought. Thanks for clarifying.
Oh well, looks like she needs to hang on for another 6 months or so until she is 55 and hope they offer it again.

Don't get your hopes up too much.  The employer costs for a 55 year old with a substantive pension will be considerable, and will be taken into account when offering redundancies in the future.

ZeroSum

If they want shot of people now, the work around would be to try & get a 6 month career break. Obviously will be without income for 6 months but pension will be a lot more as won't incur actuarial reductions if you get out as a 55 year old on redundancy than taking a deferred pension at 55.

I know a few who did this when Cameron & Osborne culled did their mass cull of council services

jamjar92

Can she not take VER and defer the date until 55? 

Johnnyboy11

Getting a VER deal after age 55 - for the win!

hyubh

ZeroSum said:

If they want shot of people now, the work around would be to try & get a 6 month career break. Obviously will be without income for 6 months but pension will be a lot more as won't incur actuarial reductions if you get out as a 55 year old on redundancy than taking a deferred pension at 55.

jamjar92 said:

Can she not take VER and defer the date until 55? 

The reason it's unreduced if made redundant from age 55 (*) is because the employer makes a payment (potentially rather large) to the pension fund. This payment ('strain charge') isn't dodged by virtue of 'really' being made redundant 6 months before employment formally ends - i.e., no strain charge calculation and payment, no unreduced pension.

That doesn't mean it won't be possible for the OP's case, but it does mean the redundancy offer would be fundamentally different, from the employer point of view, compared to one for a 54 year old going immediately.

(*) At least until the government's new exit payment cap feeds into the scheme regs.

ZeroSum

hyubh said:

ZeroSum said:

If they want shot of people now, the work around would be to try & get a 6 month career break. Obviously will be without income for 6 months but pension will be a lot more as won't incur actuarial reductions if you get out as a 55 year old on redundancy than taking a deferred pension at 55.

jamjar92 said:

Can she not take VER and defer the date until 55? 

The reason it's unreduced if made redundant from age 55 (*) is because the employer makes a payment (potentially rather large) to the pension fund. This payment ('strain charge') isn't dodged by virtue of 'really' being made redundant 6 months before employment formally ends - i.e., no strain charge calculation and payment, no unreduced pension.

That doesn't mean it won't be possible for the OP's case, but it does mean the redundancy offer would be fundamentally different, from the employer point of view, compared to one for a 54 year old going immediately.

(*) At least until the government's new exit payment cap feeds into the scheme regs.

I'm aware of all that. 
The difference is that if made redundant, they have to offer early retirement and bear the strain on fund costs. The redundancy offer would only be different if the initial offer was severance rather than redundancy. 

jamjar92

hyubh said:

ZeroSum said:

If they want shot of people now, the work around would be to try & get a 6 month career break. Obviously will be without income for 6 months but pension will be a lot more as won't incur actuarial reductions if you get out as a 55 year old on redundancy than taking a deferred pension at 55.

jamjar92 said:

Can she not take VER and defer the date until 55? 

The reason it's unreduced if made redundant from age 55 (*) is because the employer makes a payment (potentially rather large) to the pension fund. This payment ('strain charge') isn't dodged by virtue of 'really' being made redundant 6 months before employment formally ends - i.e., no strain charge calculation and payment, no unreduced pension.

That doesn't mean it won't be possible for the OP's case, but it does mean the redundancy offer would be fundamentally different, from the employer point of view, compared to one for a 54 year old going immediately.

(*) At least until the government's new exit payment cap feeds into the scheme regs.

Where I work staff were offered voluntary redunancy or severance a few years ago by a deadline date, one person opted to take severance, 8 months later and was accepted. Admittedly they not offered it since. It depends on what is being offered to OPs OH.

margaretx9

Luckily the OP's wife works in Scotland - the Scottish government has stated it won't require the cost of pension strain from retiring early to be taken into account when determining whether the new £95,000 public sector exit cap for staff made redundant has been exceeded. So she can get her full pension at 55 and take the full redundancy payment offered.
A thoroughly nasty imposition on people being made redundant from English local authorities by the Government because the LGPS is a funded scheme unlike central government pensions which are funded on the never never from assumed future tax receipts. This change will hit many relatively average or low paid local government staff in England with long service who lose their jobs in future.

So I would get her to hold on until age 55 if possible (assuming her employer is willing to allow this as it will cost them not her) - and be thankful she works in Scottish local government.
https://themj.co.uk/Scotland-to-exclude-pension-strain-from-exit-cap/214005
https://www.lgpsboard.org/index.php/structure-reform/public-sector-exit-payments