Retirements

Entitlement to Benefits

An active member leaving your employment will be entitled to immediate payment of benefits if he has reached his Normal Retirement Date (NRD). NRD is age 65.

The only other active members who are entitled to immediate payment of benefits are those who have an entitlement to benefits and:

Have their employment terminated on the grounds of permanent ill-health, or
Have their employment terminated on grounds of redundancy or in the interests of the efficiency of your organisation's functions, is aged 55 or over.

An active member who leaves between the ages of 60 and 65 is entitled to deferred benefits, although he may choose to receive benefits immediately, but they may be subject to reduction for early payment.

A female member who chooses to have deferred benefits must have her GMP put into payment at age 60 if she is not in local government employment. If she chooses to receive reduced benefits between the age of 60 and 65, they must not be reduced to less than her GMP.

A male member who chooses to receive reduced benefits between the ages of 60 and 65 may have them reduced to less than the value of his GMP. However, once he attains 65 his pension will be increased to the amount of his GMP.

If a member has an entitlement to benefits they may wish to consider the possibility of flexible retirement. From age 55 they could, with their employer's consent, reduce their working hours or move to a position on a lower grade and elect to draw all or part of the pension benefits they have already built up, while still receiving their wages/salary from their job on the reduced hours or grade (see paragraph 8.7). However, consent from the employer is also needed for the member to receive benefits.

An outline of the manner in which benefits are calculated is given in "A Brief Guide to your Pension Scheme".

Age 65

If you allow an employee to continue in employment past age 65, he will continue to be an active member of the scheme unless he chooses to opt out. However, a member is not allowed to remain in the scheme after the day before the eve of his 75th birthday.

Retiring between ages 55 and 60

An active member may leave employment between the ages of 55 and 60 and may request immediate payment of his benefits. However, his benefits cannot be paid without the consent of the employer.

If permission is given and the member receives their benefits they may be reduced for early payment. The employer may, however, determine not to apply all or part of any reduction as this is an employer discretion, but the cost of waiving reductions will be borne by the employer as will, subject to LPFA's discretion as an Administering Authority, any burden on the Fund from releasing benefits before age 60 under the employer's consent rules. Employers must have a statement of policy concerning the exercise of their discretion to allow payment of benefits on the grounds of employer's consent.

A deferred member may also request to have their deferred benefits put into payment from age 55 (age 50 if they left the Scheme prior to 06.04.2006, or left prior to 01.04.2008 but joined before 06.04.2006) but permission would need to be given by their former employer.

If permission is given, the benefits paid may be reduced for early payment. However, the former employer may decide to waive these reductions on compassionate grounds, but as with an active member, as stated above, the cost of waiving reductions will be borne by the employer and as will any burden on the Fund from releasing benefits early. Employers should also have a policy on allowing early payment of deferred benefits.

An Employee who is Permanently Unfit

Active members

Any active member, whose employment is terminated by reason of his becoming permanently unable to discharge efficiently the duties of their local government employment by reason of ill-health or infirmity of mind or body, becomes eligible for payments from the Pension Fund.

However, before making a determination to terminate the member's employment you must obtain a certificate from an independent registered medical practitioner who is qualified in occupational health medicine which should state whether, in the medical practitioner's opinion, the member is suffering from a condition which renders him permanently incapable of discharging efficiently the duties of the relevant local government employment because of ill-health or infirmity of mind or body and that, as a result of that condition, he has a reduced likelihood of being capable of undertaking gainful employment before age 65. This can be done by completing form LG/103A.

Where you do not have your own medical adviser, arrangements can normally be made for the LPFA's own medical adviser to make an examination. It is advisable for the LPFA's medical adviser to be consulted where possible to ensure consistency of treatment across the Fund.

Enhancements made to an employee's membership vary depending on the member's expected likelihood of being capable of undertaking "gainful employment" by age 65. Gainful employment is defined as any job of at least 30 hours per week, lasting at least 12 months. There are three tiers of ill-health as follows:

Tier One: If you determine that there is no reasonable prospect of the member being capable of undertaking gainful employment by age 65 his membership is enhanced by 100% of the difference between last day of employment and his 65th birthday.
Tier Two: If you determine that although the member will not be capable of undertaking gainful employment within three years of leaving his employment, it is likely that he will be capable of undertaking any gainful employment before age 65 his membership is enhanced by 25% of the difference between last day of employment and his 65th birthday.
Tier Three: If you determine that it is likely that the member will be capable of undertaking gainful employment within three years of leaving his employment his membership is not enhanced. Pension will be paid for maximum of three years but will be suspended when member obtains gainful employment.

It is the employer's responsibility to decide, based on the information provided by the medical practitioner, into which tier the member falls.

A member who receives benefits under either Tier One or Two will have their benefits payable for life, however benefits payable under Tier Three are paid for a maximum of three years from date of leaving, and the member must undergo a review at 18 months after date of leaving.

At the time of a Tier three ill-health retirement, the member will be notified by us that they are required to notify their former employer if and when they take up another employment, informing them of the details of the new employment, including annual pay and hours worked per week. The employer must then decide whether or not this constitutes gainful employment and if it does, must notify LPFA of the decision as the pension must then be discontinued. LPFA must also be informed of the date from which the pension must be stopped to enable us to calculate any possible overpayment.

If the member has not informed his employer of a new employment after 18 months from the date of leaving, the employer must contact the member to request details of any employment that the member may be in. If such employment is deemed to be gainful employment, the LPFA must be contacted to arrange for the cessation of benefits. If the member is not in gainful employment, the employer must arrange for the member to visit the medical practitioner who must then decide if he believes that the member is still suffering from a condition which renders him permanently incapable of discharging efficiently the duties of the relevant local government employment because of ill-health or infirmity of mind or body and that, as a result of that condition, he has still has a reduced likelihood of being capable of undertaking gainful employment before age 65.

The member can also be upgraded to Tier Two benefits if the medical practitioner believes that they will not be capable of undertaking gainful employment by the end of the three year period.

Deferred members

The situation regarding bringing deferred benefits into payment on grounds of ill-health is different from the case of an active member and depends on the date on which they left the pension scheme. They must be permanently unfit (at least until their 65th birthday) in respect of the employment that they held at the date of leaving.

A member who left the scheme after 31.03.2008 must be certified as being permanently incapable of discharging efficiently the duties of their former local government employment because of ill-health or infirmity of mind or body and that condition must be likely to prevent the member from being capable of undertaking gainful employment before reaching age 65, or for at least three years, which ever is the sooner.

A member who left the scheme prior to 01.04.2008 must be certified as being permanently incapable of discharging efficiently the duties of his former employment because of ill-health or infirmity of mind or body.

It is still a requirement that the (former) scheme employer must obtain the appropriate certificate from an independent registered medical practitioner before a decision can be made to put the member's benefits into payment. In this case the qualified medical practitioner should submit either form LG/103C or 103D, depending on the member's last day of employment.

Explanation of Terms

"independent medical practitioner" means that the medical practitioner has not previously advised, or given an opinion, or otherwise been involved in the particular case for which the certificate has been requested, and is not acting, and has not at any time acted, as the representative of the member, the Scheme employer or any other party in relation to the same case.

"permanently incapable" means that the member will, more likely than not, be incapable until his 65th birthday at the earliest.

"qualified in occupational health medicine" means holding a diploma in occupational medicine (D. Occ. Med.) or an equivalent qualification issued by a competent authority in an EEA State (under the meaning given by the General and Specialist Medical Practice (Education, Training and Qualification) Order 2003) or is an Associate, a Member of a Fellow of the Faculty of Occupational Medicine or an equivalent institution of an EEA State.

When form LG/103A has been completed it should be sent to the LPFA with forms LG/101 and LG/102. If you hold a "nomination of Beneficiary for the Payment of Death Grant" form in respect of the active member, this should be sent also.

If ill-health retirement results from an accident sustained in the course of the employee's duties, there may be an entitlement to an Injury Allowance. Please consult the LPFA if such a case arises.

Redundancy or Early Retirement

It is important that when considering active members for early retirement in the interests of the efficiency of the employer's service, or in redundancy situations, that you seek advice from the LPFA as to the potential costs involved. The employer may be required to pay to the Fund costs arising from the release of retirement benefits on these grounds based on the Fund's Actuarial advice. Even where an immediate payment to the Fund is not required, frequent use of these provisions will tend to increase your employer's contribution rate at subsequent valuations as releasing Scheme benefits prematurely is very expensive.

It is possible, in certain circumstances, to award an additional compensatory lump sum, under the Local Government compensation regulations. Further details are contained within Appendix 3.

Power of Employing Authority to increase total benefits of members

It is possible, in certain circumstances, to award an additional period of membership for the purpose of increasing benefits and/or additional membership under the LGPS regulations. You may award up to a maximum of 10 years additional membership and £5,000 per annum additional pension. Should you wish to use either of these options please let the LPFA have full details of the case so that you may be advised as to the costs and formalities required. See Appendix 2 for more details.

Flexible Retirement

If a member has an entitlement to benefits they may wish to consider the possibility of flexible retirement. Rather than continuing in their job to age 65 and drawing their benefits from then, they could, from age 55 and with their employer's consent, reduce their hours or move to a position on a lower grade and elect in writing to the LPFA to draw all or part of the pension benefits they have already accrued - helping to ease them into retirement - whilst still drawing their wages/salary from their job on the reduced hours or grade. They can continue paying into the LGPS to build up further benefits in the Scheme. However, consent from the employer is also needed for the benefits to be paid.

If a member takes flexible retirement before age 65, their benefits that they have accrued may be reduced for early payment. The employer may, however, determine not to apply all or part of any reduction as this is an employer discretion, but the cost of waiving reductions will be borne by the employer as will, subject to LPFA's discretion as an Administering Authority, any burden on the Fund from releasing benefits before age 60 under the flexible retirement rules. Employers must have a statement of policy concerning the exercise of their discretion to allow flexible retirement.

Note on abatement

If a member receives payment of their benefits under the flexible retirement provisions their benefits will not be subject to reduction or suspension for re-employment whilst they continue in that employment or any subsequent employment with the employer that allowed them to take flexible retirement.

Please note: Under regulation 41 of the LGPS Administration Regulations, the administering authority (the LPFA) may require employing authorities to make additional payments in respect of charges on the fund resulting from immediate payment of benefits in the following circumstances:

Early payment of benefits on employer's consent for ages 55-59
Flexible retirement for ages 55 to 59 or at any age where the employer agrees to waive, in whole or in part, any early retirement reductions
Dismissal on the grounds of redundancy or grounds of business efficiency
From any age, deferred benefits put into payment on grounds of ill-health and active members retired due to ill-health
Deferred benefits put into payment from ages 50-59

Notification of a Retirement

As soon as it is known that an active member is leaving your employment, whether on a voluntary basis or because of redundancy, etc. he should be given the booklet "Leaving the Local Government Pension Scheme" containing form LG/109. The member should complete the form and return it to the LFPA so that we are aware of his wishes with regards to his benefits, and it will also inform us of his marital status.

At the same time as the booklet is given to the member, forms LG/101 and 102 should be completed by the employer and forwarded to the LPFA. If, for any reason, particularly in the case of immediate entitlement to benefits, the final details are not available, please send in a provisional LG/102 form and send a second form with the actual/revised information together with the LG/101 when the details become available. If you hold a "Nomination of beneficiary for the payment of the death grant" form in respect of the active member, this should be forwarded as well.

In the case of flexible retirement, submit the online leaver form or paper forms LG/101 and 102 in the normal way but giving reason for leaving as "flexible retirement", together with form LG/172A showing the change of hours or revised pay rate through a change of grade in connection with taking flexible retirement.

Wherever possible, any lump sums due on retirement are paid (or at least a substantial payment on account made) within a few days of retirement. This can only be achieved if forms LG/101 and 102 are received in advance, preferably at least one month before the date of retirement.

A form P45 must not be issued to any employee who is entitled to the payment of an immediate pension. Instead, form LG/TAX1 should be sent to the LPFA as soon as the final payment of salary or wages has been made so that the correct tax code may be applied to the first pension payment. At the same time you should also give a copy to the employee for their records. A copy of this form will be sent to the LPFA's Tax Office with whom this arrangement has been agreed. However, if your own Tax Office insist that form P45 is completed, you should head the P45 "PENSIONER", send part 1 to your own Tax Office, give part 1a to the employee and send parts 2 and 3 to the LPFA.

Variations of Advance Notification

Cancellations or alterations to date of retirement, or revised final pay figures, should be notified to the LPFA quickly by telephone and confirmed by submitting a revised online leaver form or revised paper forms LG/101 and 102.

If a member receives pay after his retirement, e.g. due to a retrospective pay award, bonus payment, etc., this fact should be submitted to the LPFA through a revised online leaver form or on a clearly marked revised LG/102, together with the date that you actually paid the extra salary due. Pension contributions should be deducted and the contributions sent to the LPFA in the normal way, even if the payment is made in the next financial year. Delay in submitting revised figures may result in interest becoming payable on the increased benefits. Provided the employee's name, National Insurance number and details of any amendments are given, other information on the previous form need not be repeated.

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