Pension benefits and retirement

As of 1 April 2014, any pension scheme member, male or female, who leaves and is over age 55 will be able to access their pension, as long as they have scheme membership over 2 years.  If they are not aged 55, and have not retired for reasons of certified ill health, then they will become entitled to deferred benefits, and their pension will be put 'on hold' in the pension fund and offered to them when they reach age 55.  

The earlier a pension is drawn, the more likely it is that the benefit will be reduced, perhaps substantially, in exchange for the early payment. However members will always have the option to leave the benefits in the scheme until such a time where the level of benefits has improved and you wish to elect to draw the pension. 

The Pension Section will write to the member as soon as they are able to and have the information that they need from the employer.

That letter will provide details on the amount of pension the member can receive, and their choices when it comes to receiving a larger pension, or having some converted into tax free lump sum.  There will also be a tax form to sign, a banking payment form, and a marital status form.  Once the member has considered their options, they should return all forms to the Pension Section for processing.

The pension is paid in arrears, monthly to the account that the member nominates on the banking form they will be sent. The lump sum is also paid to the same account (unless the member asks for a different account to be used), and is paid as soon as we are able following the retirement, and depending on BACS payment timetables.

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. If this is 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 authorising flexible retirement.

If an enquiry is made, and the employer is not against the reduction in either hours or grade which is necessary, then the form FR1 should be completed.  Once the Pension Section receives the form, then the member will be sent an estimate, so they can decide if they want to go ahead.  The person signing the form will also be sent a letter advising whether there are any employer costs.  Most employers have a published policy on the criteria that they look for in order to grant flexible retirement.

If everybody is happy and wishes to proceed, then the official approval form FR2 must be completed by the employer and the member, and sent to the Pension Section.

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.  

A member can decide not to go ahead with flexible retirement, and still reduce their hours, safe in the knowledge that this decision will not affect any of the pension that they have already built up.

If a member is reducing their grade, and have pension membership prior to 1 April 2014, then the Pension Section should be contacted for more detailed advice.

Where a member is made redundant or retired early in the interest of the service (also called inefficiency), and is aged over 55, their pension is payable immediately. This is subject to them having at least 2 years membership of the scheme.

The Pension Section will release the pension once we have received the relevant instruction from the Employer.  These cases often come through Human Resources Officers.  In cases of redundancy, the employer will need to complete and send instruction to the Pension Section using the official approval Redundancy Retirement approval form. NB Leicestershire County Council and Leicester City Council have their own version of this form and can continue to use their own internal form.  Therefore all other scheme employers must use this form to notify Pension Section of a redundancy retirement.

Multiple redundancies:  In situations where a group of employees are being made redundant on the same day as part of a single process, a single copy of the form would be accepted, showing signed authority for the total capital costs, if attached to a list of the relevant LGPS members.

If the member is under 55 when retired on these grounds, then the pension is ‘frozen’ in the scheme and the member will be advised of the earliest date that they can claim their benefits and whether there are any penalties for early payment to be aware of.

If a member is being made redundant and there is no offer of any new post, it is clear that the person would receive their pension and a redundancy payment (subject to being over 55). The member must have a qualifying period of 2 years of continuous contributory membership.

If the person is re-deployed the situation is less clear.

The question is does an employee in accepting re-deployment forego redundancy.  This matter rests with the employer and employment law, and the determination of the reason rests with the Employer.  However, we would say that there is no entitlement to the pension on redundancy as the member has not technically been dismissed.

If the member has a qualifying period of 2 years of continuous contributory membership, they are eligible for ill health retirement.

These cases are often referred via Human Resources Officers.  Please contact them about any case which you think may be a possible ill health referral.

The member will be referred to their employers Independent Registered Medical Practitioner (IRMP) for an assessment.  Depending on whether the member is permanently incapable, under the rules of the scheme, the member may receive their pension early.  The level of that pension and the period it is paid for will depend on their likelihood of working again.