Flexible retirement process
Under the Local Government Pension Scheme (LGPS) regulations, an employee who has attained the age of 55* or over may, with their employer's consent, draw their retirement benefits whilst still working. However, there are certain conditions that must be met:
- Your employer must agree to the release of your pension;
- You must reduce your hours, and/or your job grade. The specific reduction required is not set out in the regulations, but instead must be determined by your employer, who must specify the requirements within their published Employer Pension Discretions Policy; and
- You meet the two year qualifying period i.e. have at least 2 years' 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 which bring your total membership to 2 years.
* Please note that the Government has announced that the earliest age you can take your pension will increase from 55 to 57 from 6 April 2028.
As Flexible Retirement is subject to your employer’s approval, we are unable to provide estimates or confirm retirement on grounds of flexible retirement to you directly. All requests must come from your employer.
You should first talk to your line manager and your employer’s Human Resources
Department with regards to the possibility of flexible retirement and whether they will consider your application for flexible retirement.
If you take flexible retirement before your Normal Pension Age, your benefits will be reduced because of early payment, unless your employer agrees to waive the all or part of the reduction.
As part of your application, your employer will contact the Staffordshire Pension Fund to obtain the pension cost for early payment of your pension.
If your employer approves your flexible retirement application, they will authorise the Staffordshire Pension Fund to provide you with your pension options.
Please note we cannot issue you with pension options without the approval of your employer.
The following will happen:
- you and your employer will agree a date of the commencement of your flexible retirement pension.
- Your current period of pension service will end, and your pension benefits will be calculated up to your date of flexible retirement.
- Your employer will automatically enrol you into the LGPS based on your new terms and conditions of employment and you will continue building up further benefits in the Scheme. However, you do have the ability to opt out of the LGPS in your new contract of employment.
For the Staffordshire Pension Fund to process your pension benefits and arrange payment the following must happen:
Action by the employee
- You must give written notice to Staffordshire Pension Fund that you wish to take immediate payment of your benefits. Your employer will provide you with an election form PEN FR 5 for this purpose.
- If you wish to opt out of the LGPS in your post flexible retirement employment, you should complete Form PEN FR 12. Note: the opt-out date given on the form must not be before the date of flexible retirement otherwise the retirement will be invalidated.
Action by your employer
- Your employer must complete and return a flexible retirement notification form (PEN FR 1) which includes your salary details for the current year up to the date you changed your contract of employment i.e. reduction in hours and/or grade.
Please note that due to the timing of your employer’s payroll your employer may not be in a position to submit the completed form until after your change of contract of employment has taken place.
Action by the Staffordshire Pension Fund
On receipt of the fully completed forms from your Scheme employer, Staffordshire Pension Fund will provide you with a final estimate of your pension benefits and forms for you to confirm:
You will also be asked for bank details and for a copy of your birth certificate or passport.
If you are registered for our online service, My Pension Portal (MPP), the quotation letter will be published in the ‘My Documents’ area of your MPP record and an email will be sent to you to inform you that your retirement documentation is available to view. If we hold a personal email address but you are not registered for MPP we will send the information to you via a Secure File Transfer (SFT) email. If we don’t hold an email address, we will post the information your home address.
From receipt of the completed flexible retirement notification form from your employer to the Fund issuing the above documentation you should allow 15 working days.
Action by you
You must complete and sign the required forms and return to the Staffordshire Pension Fund, together with copies of any relevant certificates.
You can return your completed retirement forms and relevant certificates via the ‘Document Upload’ area of MPP or via email. Alternatively, you can post documentation to us.
Remember - once you have made a decision on:
- whether to swap pension for lump sum, and
- how you want your in-house AVC to be paid
these decisions are final and cannot be reversed later.
Payment of your monthly Pension and Lump Sum
On receipt of your signed and completed forms together with the relevant certificates, Staffordshire Pension Fund will:
- Arrange payment of your tax-free pension lump sum into your bank / building society (please allow 18 working days from the date the Fund receives your completed forms).
- Arrange payment of your monthly pension will take place on the next available pay date, together with any arrears of pensions.
- Write to you confirming the tax-free pension lump sum paid into your bank/building society, together with information regarding payment of your monthly pension.
As you will note from the date you change your contract of employment, there are several steps/actions that need to take place before you will receive payment of your monthly pension and tax-free lump sum. You should allow between 2 – 3 months for the process to be completed.
Under the pension regulations, if payment of your tax-free lump sum is made more than one month after your retirement date, the Fund will pay interest of 1% per annum above the Bank of England Base Rate calculated for each day the lump sum is delayed.
The monthly pension attracts no interest for late payment. The exception to this is if the annual pension is not paid within the first year following your retirement date.
Please note your monthly pension is deemed to be taxable income and will be subject to tax deductions in accordance with the HM Revenue and Customs Rules.
If you need any further information about the areas covered by these notes, please get in touch with us.
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