What are the retirement options?
You can enjoy a guaranteed package of benefits when you retire, including a pension that can increase every year in line with the cost of living for the rest of your life and the option to exchange some of your pension for a tax-free cash lump sum.
The scheme’s normal retirement age is now linked to your state pension age for both men and women. But people retire and draw their benefits for all kinds of reasons and at all kinds of ages. You may retire and draw your benefits from anywhere between age 55, right up to the eve of your 75th birthday.
In cases of ill health, there is no lower age limit at all. There is one important condition - to be entitled to retirement benefits you must have at least two years’ membership.
What happens if I remain in the scheme to my normal pension age?
You have a right to retire and draw your benefits from your normal pension age (NPA) without any reduction being applied to your benefits. This is deemed to be the point from which your pension benefits would usually be brought into payment, the last day of employment being the day before your NPA.
What about retiring through redundancy and efficiency?
If you leave employment on the grounds of redundancy or in the interests of business efficiency and you are aged 55 or over, then your benefits are payable right away.
If you retire in this way, there are no early retirement reductions. Benefits are based on what you have built up in the scheme, up until the point you retire and not enhanced to the level you would have received at normal retirement age.
... and early retirement?
You can choose to retire from the age of 55 without permission from your employer. If you choose to retire before your normal retirement age your benefits will be reduced to take account of being paid for longer. How much your benefits are reduced depends on how early you retire.
You can retire after 65
You can stay in the scheme beyond 65. In fact, as late as 75 with your employer’s permission.
If you choose to carry on working after age 65 you will continue to pay into the scheme, building up further benefits. You can receive your pension when you retire or when you reach the eve of your 75th birthday, whichever comes first. If you draw your pension after age 65 your pension will be paid at an increased rate.
Other flexible retirement options
Rather than continuing in your job until your normal retirement age or beyond you may wish to consider the possibility of flexible retirement. From age 55, if you reduce your hours or move to a less senior position, and provided your employer agrees, you can draw some or all of the pension benefits you have built up, helping you ease into retirement.
You can still draw your wages or salary from your job on the reduced hours or grade and continue paying into the scheme, building up further benefits.
If you take flexible retirement before your normal retirement age your benefits will be reduced to take account of being paid for longer. How much your benefits are reduced depends on how early you draw your benefits. Your employer may decide not to apply all or part of any reduction. You must have your employer’s consent for the payment of your pension benefits under flexible retirement.
If you are interested in flexible retirement and require more information please refer to your employer’s policy or contact your employer direct.
Retiring through ill health
If you have two years’ membership or more and have to leave work due to illness you may qualify for immediate payment of your benefits. This can be from any age. Your employer will refer you to an independent occupational medical practitioner who will assess your condition and make decisions about the impact of your condition on your own job and your capability for other paid employment.
There are graded levels of benefit based on how likely you are to be capable of gainful employment after you leave your job.
You can now choose to take early payment of your deferred benefits from age 55 (rather than 60 or your normal pension age). A change to the scheme rules also means that you no longer need the consent of your former employer to take your benefits early.
If you were awarded a share of your ex-spouse’s LGPS pension as part of a divorce settlement and you are a pension credit member in the LGPS, you can now elect to take payment of these benefits from age 55 regardless of when the pension sharing order took effect.
Remember If you choose to take your deferred benefits earlier than your normal pension age (NPA) they will normally be reduced to take account of the fact that your pension will be paid for longer.
How much your deferred benefits are reduced by depends on how early you take them.
You may find this video from the Local Government Pension Scheme website helpful. For sub-titles, select the CC button on the video.
Life after work