Appendix iii
Flexible Retirement and Compensation
Payments Policy Guidance including guidance on Efficiency of the
Service Retirements (LGPS Members)
1.
Introduction
1.1
Following a number of reports to the County Council Staffing Committee, policy
guidance concerning Flexible Retirement and the application of compensation
payments was approved by the Staffing Committee at its meeting on 10 January
2007.
1.2
The guidance note is intended to provide a framework, available to the Personnel
Appeals Committee and to Headteachers/Governing bodies in ensuring that there is
a consistent approach to these two important developments.
1.3
Under the terms of the School’s Retirement Policy, the default retirement age
remains at 65. Within the provisions of the Local Government Pension Scheme, at
age 65 employees can retire and access immediate lump sum and annual pension
benefits, based upon qualifying service, without abatement. Under certain
circumstances retirement without abatement is possible at an earlier age.
1.4
The School’s Retirement Policy provides the facility for employees to continue to
work until age 75, subject to the organisational and workforce planning requirements
of the School.
1.5
The school supports and encourages employees in planning for retirement, and to
make best use of skills whilst remaining in employment. Employees may work
beyond age 65 and continue to make pension contributions - taking actuarially
increased benefits upon retirement.
1.6
In planning for retirement some employees may wish to consider Flexible Retirement
– enabling them, with the agreement of the school and the County Council, to
continue in employment and receive immediate lump sum and annual pension
benefits. This policy applies to school employees who are eligible to access the
Local Government Pension Scheme.
2.
Flexible Retirement Provisions
2.1
Flexible Retirement allows for immediate access to lump sum and annual pension
benefits whilst remaining at work. In order to access Flexible Retirement, an
employee must be over 50 years of age (age 55 from 1 April 2010). The employee
will require the approval of the school and the County Council. As a condition they
must transfer to a post at a lower grade, and/or reduce their contractual hours.
2.2
An employee who is aged over 50 or 55 from 1 April 2010 and under 60 may apply
for permission to take Early Retirement, without continuing in employment. In such
cases employees can seek permission to retire early and to access immediate lump
sum and annual pension benefits based on their superannuable service only, with an
actuarial reduction in benefits being payable, if they do not satisfy the Rule of ‘85.
2.3
In both the above situations, access to lump sum and annual pension benefits will
normally be paid without any enhancement, and on the basis of the employee’s own
service. Early introduction of lump sum and annual pension benefits i.e. before
normal retirement age 65, will be subject to an actuarial reduction (i.e. a financial
reduction) in the amount of pension and lump sum payable, based upon age and
length of pensionable service at the date of retirement. This reflects the fact that the
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Appendix iii
pension is being paid earlier than would have otherwise have been the case. The
actuarial reduction will not apply in situations where the employee satisfies the Rule
of ’85.
2.4
Details of the financial (actuarially calculated) reduction that will apply will be
provided by the County Council’s Pension Section. All requests must be made to the
Headteacher/Governing Body using the appropriate Flexible/Early Retirement
Pension Access Request Form.
2.5
If permission is given for an employee who chooses to take Flexible Retirement i.e.
to access their benefits but continue working in some capacity, there is no cap on
overall earnings. It is therefore acceptable for salary and annual pension to equate to
more than the employee’s original salary prior to accessing pension benefit.
2.6
Retirement, with access to full pension benefits without actuarial reduction, for
employees, over the age of 60, is only available to employees who meet the
transitional requirements provided within the Local Government Pension Scheme
Amendment Regulations No 2 of 2006. In these cases, and those cases where the
employee is 65 and over, retirement is not subject to the prior approval of the school
or the County Council.
2.7
Some employees may wish to simply request a change to working hours or a change
to the pattern or type of work undertaken as part of planning for their retirement,
without accessing pension benefits, or they may not be members of the LGPS
scheme. Any such requests should be made on the standard Flexible Working
Request Form (please refer to the Flexible Working Guidelines and Application Form
for Schools). This will be subject to agreement by the Headteacher/Governing Body.
If an employee wishes to transfer to a post of a lower grade as part of a lead in to
retirement, applications for suitable vacancies should be made in accordance with
normal school procedures.
3.
Procedure
3.1
Flexible Retirement requests, with access to early pension benefits, where there is
no cost to the school will be subject to the approval of the Headteacher/Governing
Body.
3.2
All requests for Flexible Retirement and Early Retirement should be made to the
Headteacher using the Flexible/Early Retirement Pension Access Request Form.
The Schools HR Team will then collate the financial detail in order to assist the
school in reaching a decision. Where there is a cost to the school, cases will be
submitted to the Headteacher/Governing Body/Head of HR and Exchequer
Services/Personnel Appeals Committee, as appropriate, for consideration.
3.3
In cases where Flexible Retirement is agreed, employment is continuous, and no
break in service is required before pension benefit can be accessed.
3.4
Note that in situations where the employee has retired simply in the normal course of
events, he/she may seek further employment with the school/County Council, on a
competitive basis, provided there has been at least one days break in service. In
such situations the pension may be abated when total earnings exceed the terminal
rate of pay less pension. The continuous service date for annual leave and other
purposes will be with effect from the date of the new contract. Pension contributions
can be made in respect of the new employment up to 2 days before the age of 75.
3.5
If Flexible Retirement is agreed, and the employee subsequently resigns, but is reemployed at a later date, with the same employer, the abatement rules do not apply.
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4.
Offers of Flexible Retirement by the School (i.e. where there is a cost to the
school)
4.1
In some cases, it may be in the school’s interests to offer Flexible Retirement to an
employee to facilitate organisational change. All such cases, where cost to the school
and/or County Council is involved, will be subject to approval by the
Headteacher/Governing Body/Head of HR /Personnel Appeals Committee, as
appropriate.
4.2
In Flexible Retirement cases, the Headteacher/Governing Body/Head of
HR/Personnel Appeals Committee, as appropriate, may consider one or more of the
following options:

Agreement to proposed reduced hours/changes to the post/grade and access to
pension benefits with full or part offset of the actuarial reduction in pension
benefit. If full or part offset is being considered the capitalised cost falls to the
employer and must be calculated in each case by the Pensions Fund Actuary.

Agreement to redeploy an employee with appropriate salary protection until the
agreed retirement date/normal retirement date, as appropriate.
5.
Application of Compensation Payments
5.1
Following the introduction of the Age Discrimination Regulations on 1 October 2006,
changes were made to the LGPS Compensation Regulations to remove the provision
for the award of enhanced severance payments for employees under 50, and
compensatory added years for employees over 50, in cases of redundancy or
retirement on the grounds of the efficiency of the service.
5.2
As a result of this change a new policy for the application of compensation payments
in these cases has been agreed by the Staffing Committee.
6.
Compensation Payments in Redundancy Cases
6.1
Cases of redundancy will be decided by the relevant Headteacher/Governing
Body/Head of HR /Personnel Appeals Committee, as appropriate.
6.2
In all cases of redundancy the number of weeks pay an employee is entitled to will be
determined in accordance with the statutory basis, and the amount of redundancy
pay calculated with reference to the individual’s actual normal weekly pay.
6.3
To determine the amount of the compensation payment the figure calculated on the
above basis will be multiplied by a factor of 2.5 times. This is the figure to be paid, in
total, to the individual being made redundant.
6.4
In circumstances where immediate pension benefits are payable upon redundancy
arising out of school initiated restructures where the school is seeking approval of the
County council to meet associated costs, the Personnel Appeals Committee is
responsible for determining whether the financial arrangements are acceptable to the
County Council.
6.5
Reference should be made to the School’s Redundancy Policy and Procedure for the
detail as to how redundancy situations are dealt with. No commitment must be given
to any employee where immediate pension benefits may result, prior to a decision
being reached.
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7.
Retirement on the Grounds of the Efficiency of the Service
7.1
In some cases, it may be in the school’s interests to offer early retirement on the
grounds of the efficiency of the service in order to facilitate organisational change. All
such cases will be subject to agreement by the Headteacher/Governing Body/Head
of HR/Personnel Appeals Committee, as appropriate.
7.2
Retirement on the grounds of the efficiency of the service may be available to
employees over the age of 50 (or age 55 from 1 April 2010) and under the age of 65.
It provides the facility for employees to retire early, with a pension based on their own
pensionable service, but without an actuarial reduction. The cost/strain on the fund in
respect of the early introduction of benefits is borne by the County Council in such
cases.
7.3
In exceptional circumstances, subject to the specific prior agreement of the
Headteacher/Governing Body/Head of HR/Personnel Appeals Committee, as
appropriate, an additional one-off compensation payment may be approved to
facilitate the retirement of an employee on the grounds of the efficiency of the
service. Where such cases arise an appropriate report must be submitted.
7.4
The Head of HR via the Schools’ HR Team must be consulted at a very early stage
so as to assess whether any proposal by the relevant Headteacher/Governing Body
to make a compensation payment can be justified both as to the circumstances of the
case and without being discriminatory. Generally compensation payments will not be
made in cases of early retirement on the grounds of efficiency.
7.5
All cases require the prior approval of the Headteacher/Governing Body/Head of
HR/Personnel Appeals Committee, as appropriate. There is no right of appeal in any
matter relating to a proposed retirement on the grounds of efficiency. No
commitment must be given to any employee where immediate pension benefits may
result, prior to a decision being reached.
8.
Summary
8.1
This guidance brings together a number of complicated provisions in this area
concerning Flexible Retirement and application of compensation payments.
Inevitably, therefore, much detail has had to be omitted whilst seeking to provide a
summary which is helpful in understanding the rules generally, and the school policy.
8.2
In all cases care must be taken to ensure that the circumstances surrounding each
individual situation are carefully considered and that the Head of Human Resources
& Exchequer Services via the Schools’ HR Employee Relations Team is consulted at
an early stage.
8.3
If there are any immediate queries, reference should be made to the Schools’ HR
Team who will ensure that advice and guidance is made available.
Revised 16/2/07 – Amended for Schools August 2009
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