Taking flexible retirement from a LGPS while still working

Silvertabby

bomaya said:

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.

I think we are planning to proceed with the option of taking the Pre 08 (if allowed!) but the first stage is to formally request to reduce hours which is what started all this off. 

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?

But it's not a reduction in hours that your partner wants - it's flexible retirement.  The two are very different things.  Reduction in hours is just that - no immediate access to pension, which will continue to accrue as before but at a slower rate.  Flexible retirement is the one that gives immediate access to (all or part of) the pension.

If only pre 2008 benefits are taken, then the 2008 to 2014 and post 2014 deferrals would be deferred (not frozen) using the final salary as at the date of leaving for the 2008 to 2014 calculations.  Your partner would then start a new CARE only record.

But the big question still is...would your partner's employers be willing to pay the substantial strain costs.  When ringing them, be aware that asking the wrong question will result in the wrong answer - specifically, asking about 'reducing hours' has zero pension implications for the employer, but 'flexible retirement' (as your partner is only 55) will cost them, literally, £Ks.

bomaya

Silvertabby said:

But it's not a reduction in hours that your partner wants - it's flexible retirement.  The two are very different things.  Reduction in hours is just that - no immediate access to pension, which will continue to accrue as before but at a slower rate.  Flexible retirement is the one that gives immediate access to (all or part of) the pension.

If only pre 2008 benefits are taken, then the 2008 to 2014 and post 2014 deferrals would be deferred (not frozen) using the final salary as at the date of leaving for the 2008 to 2014 calculations.  Your partner would then start a new CARE only record.

But the big question still is...would your partner's employers be willing to pay the substantial strain costs.  When ringing them, be aware that asking the wrong question will result in the wrong answer - specifically, asking about 'reducing hours' has zero pension implications for the employer, but 'flexible retirement' (as your partner is only 55) will cost them, literally, £Ks.

She requested a reduction in hours and that led to them offering the flexible retirement. According to the guide that was sent, to take flexible retirement you have to either reduce your hours by 20% or reduce your grade. This combines with them offering it only to over 55s - presumably to get them partially or wholly off the wage bill. 

So from what I read and heard (second-hand) it is something her employer is actively encouraging. Taking a hit on the pension fund but saving on the wages which directly affects budgets in the here and now. I might be totally wrong of course!

And thank you re. your second para, that was what I was assuming it meant. That taking any of the pension as flexible retirement meant effectively she was leaving that active service...the bits she's not taking would become deferred and then a day later a new period of active service would start on her reduced hours and wage as a new CARE pension. 

Silvertabby

I have to say that I'm amazed that your partner's employer is pushing flexi retirement as a cost saving exercise.

That may work for those without any R85 protections (ie, joined after October 2006), but a little voice is telling me that they haven't yet appreciated the strain costs for someone going flexi at 55 with 12 years of pre 2008 benefits.

Happy to say 'Yay!' if I'm proved wrong, but please don't make any financial decisions until ALL of the boxes have been ticked.

katejo

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.

She's already phoned HR once to query the quotation and was told it was all correct. So not sure how much I trust them to know what they are talking about. Will have to go back to them in writing I think to get this element clarified.

HR in my workplace is not allowed to advise on the pension scheme at all. They used to employ advisers but now we are referred to USS or SAUL with any questions. SAUL doesn't offer flexible retirement at all. 

bomaya

Silvertabby said:

I have to say that I'm amazed that your partner's employer is pushing flexi retirement as a cost saving exercise.

That may work for those without any R85 protections (ie, joined after October 2006), but a little voice is telling me that they haven't yet appreciated the strain costs for someone going flexi at 55 with 12 years of pre 2008 benefits.

Happy to say 'Yay!' if I'm proved wrong, but please don't make any financial decisions until ALL of the boxes have been ticked.

Sorry this is such a late reply but yes, it all went through and they are quite happily paying the flexi pension. 

PaulbytheRidgeway

May I ask why the person could not have reduced their hours without taking any pension - and not affecting the pre-2014 final salary calculations?  As far as I understand it now in LGPS I could go part time hours and when it comes to retiring the pre-2014 element would be based on the full time salary level at leaving?  I just want to know this as if correct does this mean I could even just work 1 day a week (if allowed) and get the pre 2014 element based on FT salary?  I know CARE accruals would reduce of course, its the FS element I'm interested in. Thanks!

Silvertabby

PaulbytheRidgeway said:

May I ask why the person could not have reduced their hours without taking any pension - and not affecting the pre-2014 final salary calculations?  As far as I understand it now in LGPS I could go part time hours and when it comes to retiring the pre-2014 element would be based on the full time salary level at leaving?  I just want to know this as if correct does this mean I could even just work 1 day a week (if allowed) and get the pre 2014 element based on FT salary?  I know CARE accruals would reduce of course, its the FS element I'm interested in. Thanks!

Yes, of course you can.  Reducing your hours and continuing in the pension scheme is not the same thing as flexible retirement.

daveyjp

PaulbytheRidgeway said:

May I ask why the person could not have reduced their hours without taking any pension - and not affecting the pre-2014 final salary calculations?  As far as I understand it now in LGPS I could go part time hours and when it comes to retiring the pre-2014 element would be based on the full time salary level at leaving?  I just want to know this as if correct does this mean I could even just work 1 day a week (if allowed) and get the pre 2014 element based on FT salary?  I know CARE accruals would reduce of course, its the FS element I'm interested in. Thanks!

The idea of flexible retirement is the pension payment covers the drop in income by going to part time hours.  Just go part time and the member only receives a part time salary.

Depending on the new salary it my also be possible to pay the maximum possible into salary sacrifice AVCs from the part time salary and receive another 100% tax free lump sum on full retirement.

katejo

PaulbytheRidgeway said:

May I ask why the person could not have reduced their hours without taking any pension - and not affecting the pre-2014 final salary calculations?  As far as I understand it now in LGPS I could go part time hours and when it comes to retiring the pre-2014 element would be based on the full time salary level at leaving?  I just want to know this as if correct does this mean I could even just work 1 day a week (if allowed) and get the pre 2014 element based on FT salary?  I know CARE accruals would reduce of course, its the FS element I'm interested in. Thanks!

That's what I am doing but on SAUL not LGPS. Saul doesn't allow flexible retirement (as I sad previously) so I am living on a reduced 3 days a week. My CARE will be lower but my Final Salary part is unaffected because that came to an end in 2016 and I was guaranteed a non reduced pension as long as I worked up to 60. However, I think the final salary amount is based on what I was earning in 2016 when the final salary scheme closed not my salary when I started to reduce my hours.