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Taking flexible retirement from a LGPS while still working


Hi there, hoping to get some advice on behalf of my partner who is a member of the West Yorkshire Pension Fund (Local Government Pension Scheme).
She’s 55 and has recently been looking to reduce her hours from five days a week to four. When she requested this from the HR department, she was offered the option of taking some or all of her pension as a flexible retirement. (For those who don't know this scheme is a mix of Final Salary Defined benefit and CARE).
They have offered three different options – to take all her benefits, to take all the Pre 2014 benefits or just to take the Pre 2008 benefits. From looking at it, the Pre 2008 benefits appear to be unreduced. Reading through the paperwork, this seems to be down to the ’85-year rule’ which states that if your age plus your length of membership is 85 years or more then you get the Pre 2008 unreduced.
My first question is about the 85-year rule. Am I right in thinking that the membership can include service for the Local Government that pre-dates the pension scheme membership? And the membership also appears to treat part-time service as full-time years – is that correct? Reason I am asking is she can only meet the 30 years needed if they are counting the year and eight months that she worked before joining the pension scheme and that it is ignoring the many pro-rated years when she worked part-time after having children.
The second question is a more general one about taking flexible retirement whilst still working. I can see that clearly she is going to be paying tax on her pension which she possibly wouldn’t if she left it all until her normal retirement age but other than that, are there any other downsides to taking some of your DB pension/tax-free cash sum when still working?
Any advice on these points will be greatly appreciated along with anything else you think we might need to know what we’ve not thought about.
Comments
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R85 is based on calendar years of actual fund membership, and won't include any LGPS employment that pre-dates pension scheme membership. Do you know why she didn't join the scheme straight away? Was it because she joined pre 1995 in a part time role?
Back to the quotes.... who supplied these? It's just that anyone with R85 protections who takes flexible retirement before age 60 would be paid their pre 2008 accruals without any reductions for early payment, even though R85 remains linked to the old rules minimum retirement age of 60. In the case of flexi retirement, the employer has to pay the strain costs of paying the pre 2008 benefits unreduced - and these costs can be considerable.
Before making any firm decision to take flexible retirement, your partner should confirm with HR that they are aware of the costs, and are willing to pick up the tab.
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In these financial times flexi retirement before the age of 60 is very rare so I would press further with HR that it is actually a viable option.
The employer should have a policy on employer discretion relating to requests for early payment of pensions, especially where strain costs could be significant - this is the amount paid by the employer to the pension provider when a decision is made to agree flexible retirement.1 -
Silvertabby said:R85 is based on calendar years of actual fund membership, and won't include any LGPS employment that pre-dates pension scheme membership. Do you know why she didn't join the scheme straight away? Was it because she joined pre 1995 in a part time role?
Back to the quotes.... who supplied these? It's just that anyone with R85 protections who takes flexible retirement before age 60 would be paid their pre 2008 accruals without any reductions for early payment, even though R85 remains linked to the old rules minimum retirement age of 60. In the case of flexi retirement, the employer has to pay the strain costs of paying the pre 2008 benefits unreduced - and these costs can be considerable.
Before making any firm decision to take flexible retirement, your partner should confirm with HR that they are aware of the costs, and are willing to pick up the tab.
The quotes came directly from the West Yorkshire Pension Fund. This is the first I've heard of the term 'strain costs' but the paperwork does mention that taking an unreduced element under the 85 year rule is down to the Employer's discretion. So presumably she could potentially accept the quotation and still be refused by the Employer?0 -
daveyjp said:In these financial times flexi retirement before the age of 60 is very rare so I would press further with HR that it is actually a viable option.
The employer should have a policy on employer discretion relating to requests for early payment of pensions, especially where strain costs could be significant - this is the amount paid by the employer to the pension provider when a decision is made to agree flexible retirement.0 -
bomaya said:Silvertabby said:R85 is based on calendar years of actual fund membership, and won't include any LGPS employment that pre-dates pension scheme membership. Do you know why she didn't join the scheme straight away? Was it because she joined pre 1995 in a part time role?
Back to the quotes.... who supplied these? It's just that anyone with R85 protections who takes flexible retirement before age 60 would be paid their pre 2008 accruals without any reductions for early payment, even though R85 remains linked to the old rules minimum retirement age of 60. In the case of flexi retirement, the employer has to pay the strain costs of paying the pre 2008 benefits unreduced - and these costs can be considerable.
Before making any firm decision to take flexible retirement, your partner should confirm with HR that they are aware of the costs, and are willing to pick up the tab.
The quotes came directly from the West Yorkshire Pension Fund. This is the first I've heard of the term 'strain costs' but the paperwork does mention that taking an unreduced element under the 85 year rule is down to the Employer's discretion. So presumably she could potentially accept the quotation and still be refused by the Employer?
Yes, absolutely. The employer strain costs of paying up to 12 years of pre 2008 benefits without any actuarial reductions would be enormous. Her employer refusing to pick up the tab is very much a possibility.1 -
bomaya said:daveyjp said:In these financial times flexi retirement before the age of 60 is very rare so I would press further with HR that it is actually a viable option.
The employer should have a policy on employer discretion relating to requests for early payment of pensions, especially where strain costs could be significant - this is the amount paid by the employer to the pension provider when a decision is made to agree flexible retirement.1 -
Presumably this is one pension record built up through continuous service, and not three separate records from different periods of employment?Fashion on the Ration
2024 - 43/66 coupons used, carry forward 23
2025 - 60.5/891 -
Sarahspangles said:Presumably this is one pension record built up through continuous service, and not three separate records from different periods of employment?2
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Silvertabby said:Sarahspangles said:Presumably this is one pension record built up through continuous service, and not three separate records from different periods of employment?
Yes, correct, it's one continuous period of service with just the occasionally thing like Maternity Leave, a Part-Time period and one Strike Day breaking it up.1 -
Silvertabby said:The quotation being correct isn't the issue here - the question is will the employer pay the strain costs or not. Note that they may not address that question until your partner actually submits her application for flexible retirement - until then, any quotes supplied are purely on a 'what if' basis.
Something else the HR person said on the phone has puzzled me. Not sure if it's me not understanding or them using the wrong terms. They said if my partner did take the option of receiving the Pre 08 pension, then the other two tranches (08-14 being final salary 14-now being CARE) would be 'frozen' and a brand new tranche of pension would start.
Bit puzzled about this 'frozen' reference. Are they meaning that the 08-14 tranche would take today's final salary and be frozen in that way? In other words, any future salary increases would not improve this tranche? And if it is this, how would that affect the CARE side of things?
Or does this mean something else in this context?0
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