Flexible Retirement

Flexible retirement became available under the Scheme starting from 6 April 2006. It allows members to begin receiving all or part of their retirement benefits without fully retiring.  This is providing the following conditions are met:

• The member is aged 55 or over at the time of flexible retirement.
• The employer agrees to the flexible retirement and understands it may come with an employer cost.
• There is a reduction in the member’s working hours, or
• There is a reduction in the member’s grade.

The flexible retirement process

Initial conversations

If an employee is considering flexible retirement, the first step is to discuss the option with their employer to seek formal consent.

Pension impact

The pension benefits a member receives may be subject to actuarial reductions. However, as the employer, you have the discretion to waive some or all of these reductions. Please note that doing so will result in a Strain on Fund cost. There is sometimes a cost even without waiving reductions, so it is important to consider all potential financial implications when making these decisions.

Discretions policy requirements

All employers participating in the fund are required to:

• Create and publish a discretions policy within three months of joining the fund.
• Review and update this policy at least once every three years.

Your discretions policy must clearly state your position on flexible retirement. Any decisions made should align with the policy currently in place.

Need more information

For further guidance on discretions, please contact the Employer Liaison Team at LGPSemployers@cornwall.gov.uk.

Obtaining a strain cost calculation

Before proceeding with a member’s flexible retirement, you must obtain both:

• An estimate of the strain cost, and
• A summary of the pension benefits the member would receive.

These estimates can be requested by emailing pensions@cornwall.gov.uk. Once your request is received, we will provide you with a bulk calculation for all eligible members. This can used throughout the year to assist your ongoing planning and decision-making.

Note: Strain costs for flexible retirement cannot be calculated using i-Connect. That tool is only applicable for redundancy cases.

What the estimate includes

Once your request is received, you will be provided with:

• A breakdown of the benefits payable to the employee, and
• The estimated strain cost to the employer.

The strain cost will vary depending on:

• The benefits the member chooses to draw,
• The impact of any additional membership on the member’s 85-year rule date (for those entitled to additional benefits), and
• Whether the employer chooses to waive any actuarial reductions, in full or in part.

Next steps

You must:

1. Share the estimate with the employee.
2. Discuss their options in detail.
3. If both parties agree to proceed, notify the Fund as soon as possible to move forward with the flexible retirement process.

Important considerations for flexible retirement

Timing and payroll implications

When processing a flexible retirement, please be mindful of the timing. If the retirement is agreed at the start of the month, the fund will not be notified until your next i-Connect submission. This may be as late as the 19th of the following month.

This delay means the fund may receive the notification after the payroll cut-off, preventing the pension from being paid until the following month. This could place the member in a financially difficult position.

Note: This delay would also impact any lump sum payments due to the member, as the i-Connect return is required to calculate the member’s lump sum entitlement.

Flexibility in retirement dates

Flexible retirement dates can be adjusted, and moving the date typically has minimal impact on the strain cost calculation. This provides some flexibility in planning the retirement to align with payroll schedules and avoid delays. Please note that we would not issue a new quote to either the employer or the member if the retirement date changes with six months of the original quotation.

The reduction in hours or pay must take place on the flexible retirement date. Therefore, if the flexible retirement date changes, the timing of the reduction must also be adjusted.