Please note that the process is likely to change again, as the Pension Section are aware of Government’s intention to introduce legislation that is likely to have some effect on redundancy benefits within 2021. This will follow an expected consultation from Government. At this stage it is unclear when the legislation will come into force, or the extent of the changes. When more information is available, we will update you accordingly..
Too young to claim the pension
Redundancy and Business efficiency retirements (not ill health)
Too young to claim the pension
Leaving employment but not retiring
When members leave the scheme it is the responsibility of the employer to inform the Pension Section in good time, and to provide accurate pay details that will be required to calculate the pension benefits by completing a ePen3 form.
A scheme member who undergoes a change in their employment which requires a change in Pension Scheme entirely is still regarded as a scheme leaver and the same criteria applies. This applies for example, to staff that are transferred from the Local Government Scheme, to perhaps the Teachers Pension Scheme or the Universities Superannuation scheme due to a change in role.
What age must an employee be to qualify for retirement benefits?
Upon reaching age 55, the member will be offered their pension benefits as long as they have been a member of the scheme for over 2 years. The member can receive their pension benefits anytime between age 55 and 75. However the earlier the pension is paid, the lower it will be and likewise, the later it is before the pension is drawn, the nearer the full pension the amount will be.
The entitlement to elect to draw the pension between the ages of 55 and 59 without the employer’s permission does not extend to members who left the LGPS before 31 March 2014.
Normal retirement
What do I do when a scheme member leaves employment and is retiring?
For any member who is retiring, notification must be sent through to the Pension Section as soon as that information is available. This can be by memo, e-mail, or by copying to us any correspondence sent to the member in relation to their retirement.
There may also be a variety of supporting documentation required.
When members leave the scheme it is the responsibility of the employing authority to provide details on the Scheme Leavers form (ePen3).
What happens if a member wishes to return to Local Government employment soon after retiring and claiming their Local Government Pension?
Firstly, it is important to establish that it has been a genuine retirement. If a member wishes to draw on their pension, and yet wish at some time in the future to become re-employed in Local Government it should be emphasised that as long as the original retirement and the second position are considered quite separate employments, there is no reason why the first pension will not be paid.
To sum up, if a member genuinely resigns, retires and leaves employment and subsequently gains further employment, through the normal selection procedures, they are able to receive, or continue to receive, their pension. However, a break in service, or a contractual change in hours or grade, does not constitute a re-employment.
Caution is therefore advised, as the pension will not be released if the Pension Section does not feel that these conditions have been met.
Can a member receive their pension without leaving employment?
In order for a member to receive their pension benefits in respect of their employment, they must, in most circumstances, actually leave that particular employment in order to do so. If this is indeed the case, then the pension can be paid. However, there is a facility for an employer to allow a member to receive their pension without leaving that employment, by exercising the Regulation which allows flexible retirement.
Can an employer allow a member to retire voluntarily with an unreduced pension?
A member of the pension scheme who retires voluntarily and receives their pension between the ages of 55-65 will have that pension benefit reduced to some extent. These reductions could be significant, but are merely an exchange with the pension fund for early payment.
The employer will need to determine a policy on whether their organisation will waive early retirement reductions, whether that be in full or partially, and if so in what circumstances. This would therefore mean that the employer would pay capital costs to the pension fund to make up the difference. Please check with your employer on their individual policy, however the majority of our employers do not waive reductions on a regular basis, and members must draw reduced benefits if they wish to have early access to the benefits.
Flexible retirement
What is ‘flexible retirement’ and what do I have to do?
Under the pension scheme rules it is now possible, from age 55, to retire and receive pension benefits without completely leaving employment, with the agreement of the Employer to release the benefits.
This is mainly because flexible retirement can only be considered in situations where a pension scheme member has either reduced their working hours or reduced their grade Some Employers may operate a policy whereby a minimum reduction in hours is required in order for Flexible Retirement to take place for organisational reasons.
When an employer has reached an agreement, in principle, to a reduction in either the member’s hours or grade, probably with the Line Manager, the employer will need to know the financial implications.
For the member, this will mean what pension figures they can expect and for the employer this will mean what costs might be attached to any potential flexible retirement. It is of particular importance that the member receives an estimate of their benefits, as there can still be reductions to benefits under flexible retirement rules, and members need to be aware of this possibility.
For all cases, the Line Manager or Human Resources Officer will complete and return the flexible retirement enquiry form FR1 to the Pension Section at County Hall. There are accompanying notes included.
The Pensions Section will then send the appropriate information to the member and employer.
Does the employer have to grant flexible retirement?
Remember, an employer can agree to a member reducing their hours or grade without allowing the release of pension benefits.
Also, each employer will have a published policy in place to determine the circumstances where flexible retirement is permissible.
What are the potential costs of flexible retirement to an employer and to a scheme member?
Not only does the member need to be aware of the value of their pension before they formally request flexible retirement it is crucial that the employer is aware of whether there are any costs involved before they can agree to it.
In order to help each employer determine whether release of pension is possible, particularly if your employer has decided upon a ‘no-cost to the employer’ approval policy, on receipt of the FR1 form, the employer will receive confirmation of whether there are any costs involved, and the member will receive a forecast of the benefits they would receive.
Members should be aware that these reductions can sometimes be quite large. Remember, if a member takes a reduced pension, it will remain reduced for the rest of the member’s life, even when they finish work and lose their salary.
What do I need to do once the flexible retirement has been approved?
Once the flexible retirement has been approved, you will need to complete the form FR2 and forward it to the Pensions Section. You will need to confirm the date of change, and details of the new contract. IMPORTANT: You will also need to inform your Payroll Section so that they can send an ePen3 form to the Pension Section.
You will also need to ask the member to make a declaration on the form, stating whether they wish to remain in the pension scheme following their flexible retirement, and therefore build up another pension entitlement. Remember to ensure Payroll take the appropriate action depending on the member's wishes.
If a member is paying AVCs, or ARCs or APCs or purchasing additional service, payroll staff must always assume that these additional contributions will cease on the date of change unless instructed otherwise.
In the unlikely event of a flexible retirement being approved with a capital cost, additional verification must come from the appropriate level, e.g. Head of Finance, Departmental Director, Chief Executive etc.
What are the alternatives to flexible retirement?
With the LGPS being a scheme whereby the pension benefits are worked out on a career average basis, using a member’s actual pay for each year that they are in the scheme, this is a very fair way of working out the pension. Increases and decreases in hours are accommodated well, and a member will always receive a pension which is fairly linked to what they have worked and been paid for in that year. The LGPS is no longer a scheme that is all about the pay that the member ends up on just before retirement.
For members who were in the scheme prior to 1 April 2014, and have an element of their pension linked to membership and the old definitions of pay and service, they can rest assured that their final whole time equivalent pay will be used to calculate this element of the pension benefits. Therefore members can drop their hours and still continue paying into the scheme without it affecting the benefits that they built up previously. This is because the Regulations reflect a Governmental guarantee that the final salary link would be maintained for members who joined the scheme before 31 March 2014.
And so it could be that they may then be happy to drop their hours without drawing the pension, as long as a drop in grade does not occur.
Even those who drop their grade do not need to rush into anything and apply for flexible retirement and draw on the pension.
For members who were in the scheme prior to 1 April 2014 who see a reduction in grade we will use best of the last 3 years final pay when calculating pension benefits. A period further back may also be selected should a reduction have taken place within the last 10 years before retirement, but as this involves an average pay calculation a scheme member may wish to talk the matter over with the Pension Section before making this decision. There are also specific conditions that must apply to the use of this regulation.
If they are likely to suffer a reduction to benefits by retiring before state pension age, staying in the scheme for as long as possible and not drawing on the pension will mean less of a reduction for every extra day they remain in the scheme.
Redundancy and Business efficiency retirements
Members of the LGPS aged 55 or over with at least two years scheme membership who are made redundant (either voluntary or compulsory) or retired in the interests of business efficiency, will be entitled to immediate payment of their Local Government Pension.
Following recent events in which the government introduced, then subsequently disapplied a £95,000 ‘Exit Cap’, please read below for the latest process for retirements on either redundancy or efficiency grounds.
Redundancy Process for scheme employers (correct as at 11 March 2021)
In the vast majority of redundancy or efficiency retirements a cost will apply to the employer to finance the early payment of that pension, known as capital, or strain costs.
In order to establish the amount that is likely to be payable, employers must complete the REDCOST1 form below. Note that the standard turnaround for the provision of the information is four weeks.
Alternatively, speak to Pensions about the possibility of receiving estimated costs in bulk, particularly where multiple cases are likely. Whilst this may result in a slightly less accurate figure, it is likely to be sufficient to establish whether redundancy will be an affordable option for particular members.
Employers may then wish for their scheme members to receive an estimate of their likely pension benefits to allow them to decide whether to accept early retirement, in the event that employers would want to give them such an option. Such requests must come through employers, not directly through members, and must be requested by submitting the REDQUOTE1 form below. Again, the standard turnaround time for these requests are four weeks. However, employers are reminded that scheme members can be directed to the Pensions Online Portal to use the modeller for an indicative quote of their pension benefits.
If the scheme member hasn’t already registered, they can do so on the site. They need to have their NI number and a personal email address to hand. Contact details are on the registration page should they get into difficulty.
In the event that it is decided that early retirement will go ahead, employers must submit a REDAPPROVE1 form, as well as ensuring that the usual ePen3 leavers form is provided.
Note that as part of the process, the Pension Section will issue an invoice in respect of the strain costs due. If you require a PO number to be included in that invoice, you will be able to include it on this form.
For further information regarding the provision of estimated figures including bulk cost figures, contact Phil Drury phil.drury@leics.gov.uk or Lesley Loakes lesley.loakes@leics.gov.uk.
For further information regarding the process once the retirement is approved or the process in general, contact Sue Hodson sue.hodson@leics.gov.uk.
Related forms
Please download and complete the following form if you wish to be provided with early retirement costs for a single scheme member:
Please download and complete the following form if you wish for a scheme member to be provided with pension figures based on early retirement on the grounds of redundancy or in the interests of efficiency:
Please download and complete the following form once a redundancy or efficiency retirement has been confirmed, along with the usual ePen3 form.
Ill health retirement
During the current COVID-19 crisis, some employers have had questions about obtaining opinions from Independent Registered Medical Practitioners (IRMPs). The Local Government Association (LGA) queried the position with the Association of Local Authority Medical Advisers (ALAMA), who confirmed that ill health applications should continue to progress during the pandemic and the following statement has been published on the ALAMA website:
During the current COVID-19 crisis, it is important to continue to progress ill health retirement applications. It is also particularly important that assessments remain fair and reasonable, and that should include requesting GP and specialist reports as required. There has never been a requirement for these assessments to be face to face, therefore paperwork reviews, with telephone clarification if needed, is the most appropriate way to progress these.
If it is not possible to get reports, an assessment should be based on whether reports are likely to influence your decision further, and whether you have enough objective evidence to make an opinion. Opinions should always be ‘on balance of probability’. There will be times when you simply don’t have sufficient objective evidence to support ill health retirement, and you have been unable to get clinical reports. You should suggest that the applicant requests copies of clinical reports direct from their GP.
Person:ALAMA website
Also, the LGA has advised that employers may experience delays in obtaining an IRMP’s opinion in relation to an ill health retirement application or a Tier 3 ill health review. Any such delay could affect the date from which an ill health pension is payable, or the date that a Tier 3 pension is upgraded to Tier 2. To help employers make their decisions, employers may wish to ask IRMPs to include in their report information about any delays due to COVID-19 that have affected the member’s application.
What do I need to know about Ill health retirements?
The ill health retirement rules are prone to alteration and re-interpretation from time to time. Please ensure that the latest advice is followed and the current set of ill health certificates are always used. This is all available in our local guide which is available to download here:
The form I-HNOTN is for employers to use in all cases when notifying the Pension Section of an ill-health retirement or of the release of a deferred pension on ill health grounds, and is available here for you to use:
An ill-health retirement will not be processed without it. This form is to be sent to the Pension Section with a copy of the ill-health certificate. Please ensure that it is signed at the appropriate level to authorise early retirements of this nature.
To help HR staff and line managers understand what is required of them when investigating an ill health case, two flow-charts have been designed to take you through the processes step by step:
A document has also been produced nationally to assist employers and practitioners:
Death in service
In cases where an employee dies in service, the Pension Section should be notified immediately by telephone or e-mail. For non-Leicestershire County Council Employees, once further details have been established, the Scheme Leavers form (ePEN3) will need to be completed and forwarded to the Pension Section as a matter of urgency. If a representative is to visit the family, we will also require the following documents:
- The death certificate
- If there is a spouse, copies of the Marriage certificate or Civil Partnership registration and their Birth Certificate are also required.
If the deceased was unmarried and not in a civil partnership, but there is a cohabiting partner, please let us know the partner's name, and the Pension Section will let him/her know details of the criteria for claiming a partner's pension so that they can check to see if they qualify. this is because partner's pensions are not automatic, there must be certain qualifying conditions.
- We also require a note of the spouse's National Insurance number.
If there are natural or adopted children under age 18 or in continuous full time education up to age 23, or there are children who are dependent due to a disability, we will also require copies of their birth certificate to establish their eligibility to a pension benefit. The Pension Section may well write for further documents in due course, such as confirmation from the school or college that the child is attending.
- Photocopies of documents would be preferred.
If it is not appropriate at the time, please supply the Pension Section with as many details as you have, and the Pension Section will write requesting the necessary information. If there is not to be a home visit, or if there is no known family, then please advise the Pension Section of the name and address of the informant, or the representative of the deceased, in order that contact can be made directly with them.
What happens to the death grant?
The death grant is intended for the benefit of the pension scheme member’s nominee or personal representative or any person appearing to have been a relative or dependant at any time. A member may have nominated the beneficiary(ies) by completing a Death Grant Expression of Wish form.
Nomination forms are also available on request and are provided to all new starters to the pension scheme.
Please note that a member can check whether the Pension Section holds details of any nominees as this is referred to on their annual pension benefit statement.