ETOC10.DOC/DDR/SW 1 Agenda Item: 7A Wolverhampton City Council OPEN EXECUTIVE DECISION ITEM (AMBER) Cabinet / Cabinet Panel CABINET Date 14.11.07 Portfolio(s) ALL Originating Service Group(s) RESOURCES AND SUPPORT Contact Officer(s)/ B BAILEY Telephone Number(s) EXT. 4500 Title EARLY TERMINATION OF EMPLOYMENT KEY DECISION: YES IN FORWARD PLAN: YES 1. RECOMMENDATIONS 1.1. Members are requested to give consideration to:- a) The ending of the scheme for generally awarding discretionary added years, whether by reason of redundancy or efficient exercise. b) The arrangements for considering any exceptional circumstances that may lead to the award of discretionary years as set out in paragraph 2.2. c) The award of redundancy payments as set out in paragraph 2.6 and Appendix 2. e) The above being implemented for any member of staff who leaves after 1 April 2008. e) The introduction of the flexible retirement scheme set out in Appendix 3 from 1 January 2008. 1.2. Members are requested to note that consultation has taken place with the Trade Unions on the proposals, and written responses requested which will be available at the Cabinet meeting.
Transcript
ETOC10.DOC/DDR/SW 1
Agenda Item: 7A Wolverhampton City Council OPEN EXECUTIVE
DECISION ITEM (AMBER) Cabinet / Cabinet Panel CABINET Date 14.11.07 Portfolio(s) ALL Originating Service Group(s) RESOURCES AND SUPPORT Contact Officer(s)/ B BAILEY
Telephone Number(s) EXT. 4500 Title EARLY TERMINATION OF EMPLOYMENT KEY DECISION: YES IN FORWARD PLAN: YES 1. RECOMMENDATIONS 1.1. Members are requested to give consideration to:-
a) The ending of the scheme for generally awarding discretionary added years, whether by reason of redundancy or efficient exercise.
b) The arrangements for considering any exceptional circumstances that may lead to
the award of discretionary years as set out in paragraph 2.2. c) The award of redundancy payments as set out in paragraph 2.6 and Appendix 2. e) The above being implemented for any member of staff who leaves after 1 April
2008. e) The introduction of the flexible retirement scheme set out in Appendix 3 from 1
January 2008.
1.2. Members are requested to note that consultation has taken place with the Trade Unions on the proposals, and written responses requested which will be available at the Cabinet meeting.
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EARLY TERMINATION OF EMPLOYMENT
1. BACKGROUND AND EXECUTIVE SUMMARY 1.1. Cabinet agreed at its meeting on 15 November 2006, a revised scheme for awarding
discretionary added years for pension purposes where a member of staff has their employment terminated before normal retirement age. It was agreed at the time that the arrangements would be reviewed for April 2008 to reflect the financial pressures the Council faces over the medium term, the pending changes in the Local Government Pension Scheme Benefit regulations and concerns over the potential discriminatory nature of the current scheme.
1.2. The financial pressures the Council faces over the medium term, particularly with a
forecast fall in Revenue Support Grant in real terms, are significant and challenging as described in the March 2007 budget report to Council and subsequent updates. The Council therefore needs to consider further the difficult issue of balancing the high costs associated with an added years scheme and its affordability. In addition, the equality issues associated with the potential differing impact of an added years scheme on men and women as well as the age cut-off issues raise serious concerns over maintaining the current scheme. Based upon the above concerns the current scheme is not sustainable. This position has been reached by many authorities and early retirement schemes have or are being changed.
1.3. It is, however, proper that the Council recognises that its ending of staff contracts
before normal retirement age (whether by reason of redundancy, efficient exercise or under the 85 year rule) should lead to financial compensation for the individual and regulations require a minimum redundancy payment, but enable a Council to pay more. Many authorities in ceasing to have an added years policy, have increased the redundancy payments made and it is proposed that this Council considers this option.
1.4. The Council has discretion to operate a flexible retirement scheme under the LGPS
regulations that could be beneficial to the Council and staff in some circumstances. It is proposed that as the above changes are made, a flexible retirement scheme is introduced.
2. EARLY TERMINATION OF EMPLOYMENT 2.1. The attached November 2006 report contains the detailed information which remains
current. As highlighted in Section 2 above, it is recommended that the scheme for awarding added years for pension purposes is ended subject to the Council reviewing its redundancy payments scheme (see below). This is on the basis of affordability and potential discriminatory effects of the current approach.
2.2. The power to award added years will exist as a discretion available to the Council
and in exceptional circumstances it may be appropriate to exercise that discretion. It is proposed to follow the established practice and delegate to the Director for Resources and Support and Chief Human Resources Officer consideration of cases with a small financial impact (£20,000) and all others subject to written recommendations being made to the Human Resources (Appeals Panel) where there are exceptional circumstances (e.g. severe individual hardship or personal circumstances). It is not expected that this discretion will be operated very often and each individual case will be determined on its merits.
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2.3. Redundancy payments are currently paid to staff based upon the statutory scheme with a maximum weekly pay figure capped at £310.
The redundancy payment due to each employee under the statutory redundancy
payment scheme depends on his or her age and length of service (up to twenty years). This determines the number of weeks pay due, which is then subject to a limit on weekly pay.
The calculation of the number of weeks pay due is published by the Government with
appropriate calculations tables. In summary the calculator works as follows:-
• 0.5 week’s pay for each full year of service where age during year less than 22.
• 1.0 week’s pay for each full year of service where age during year is 22 or above, but less than 41.
• 1.5 week’s pay for each full year of service where age during year is 41+. • The maximum week’s pay that an employee is entitled to under the statutory
scheme is currently £310. The limit changes every February in line with the Retail Prices Index.
2.4. The Council has discretion to increase the minimum payment (Appendix 2). The
maximum that can be awarded under the relevant regulations is 104 weeks pay. Authorities that have moved to withdrawing their pension augmentation schemes have increased the payments under the redundancy regulations.
2.5. The following information from the Employers’ Organisation is available on the
approach of other Authorities. At least 41 authorities, out of a group of 67, are adopting the Local Government
Employers’ suggestion of calculating discretionary payments under Reg. 6 by applying a multiplier to the redundancy payment formula.
The various multipliers used break down as follows:- 1.2 1 authority 1.3 2 authorities 1.5 16 authorities 1.75 2 authorities 2 8 authorities 2.2 7 authorities 2.75 1 authority 3 1 authority 3.46 2 authorities A smaller number of authorities set a maximum for their payments under Reg. 6
(some of which combine this with using the multiplier approach). The levels of these “caps” break down as follows:-
There are concerns that such an approach on ‘caps’ raises discriminatory issues particularly in respect of age. On this basis it is proposed the Local Government Employers Organisation suggestion is followed and a straight multiplier is used.
2.6. It is proposed that this Council review its redundancy payments scheme following the
ending of its general discretionary added years scheme and introduces a scheme as set out in Appendix 2. This changes the payments received by an individual to statutory redundancy calculated number of years times actual pay multiplied by 2.0.
2.7. The financial impact of the change will depend upon the profile and number of staff
leaving due to the Council ending their contracts. The proposed arrangements look to normally recover the severance costs by the saving on the employee costs over not longer than 24 months and operate a scheme towards the middle of the range available, thereby attempting to balance the costs to the Council and interests of the individual. Examples of the impact are as follows:-
* There would be no added years pension enhancement, but a strain from the early
payment of pension that was described in the November 2006 report would be met by the Council.
2.8. Appendix 4 given further examples for employees who are members of the LGPS or
Teachers Pension Scheme and have worked for this Council for 30 years (using a range of salary levels and employee ages).
3. FLEXIBLE RETIREMENT 3.1. Attached is a note (Appendix 3) setting out the background to the arrangements that
are possible and a proposed scheme for Wolverhampton. 4. EQUALITY IMPACT ASSESSMENT 4.1. What information/data was gathered? The relevant statutory discretionary powers were established, together with
information from the Employers' Organisation about early retirement arrangements adopted across 67 local authorities.
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4.2. Who was consulted? A draft copy of the Cabinet report was sent to all local trade union representatives
across the Council on 18 October. Written responses were requested by 9 November, and an undertaking given that these would be made available to Cabinet.
In producing the report, consideration and comments were also invited from the Chief
Executive and Directors. 4.3. What were the key findings- any adverse impact? The equality issues associated with the potential differing impact of an added years
scheme on men and women as well as the age cut-off issues raises serious concerns over maintaining the current scheme. The potential discriminatory effects of the current scheme means that it is not sustainable.
The Council will under the new proposals be much better placed to ensure that its
severance arrangements are not discriminatory. For Council employees that are not members of either the Local Government Pension
Scheme or the Teachers Pensions Scheme, the redundancy payments available under the proposals are significantly greater than under the Council's current scheme.
For Council employees that are members of either the Local Government Pension
Scheme or the Teachers Pension Scheme, the proposals offer savings to the Council. The impact to individual employees is more difficult to precisely determine since this will be dependant upon factors such as longevity, whether single, number of children, etc.
Responses are awaited from Trade Unions and these will be available at the Cabinet
for consideration. 4.4. Were changes made to proposals/actions proposed for the future as a result of the ELA? The proposals are based upon Government schemes that have been evaluated from
their equality impact and are in common operation. The aim of the proposals has been to balance the affordability for the Council (and hence its capacity to delivery services and provide employment) and mitigating the financial impact to the
individual of their contract of employment ending. 4.5. What arrangements are being made for monitoring impact when the policy is in operation? The Cabinet (Resources) Panel has for several years received regular monitoring
reports which include, inter alia, details of all early retirements. This will continue. The Council's general approach, however, remains one only using early retirement or
severance when all other options have been exhausted. 5. FINANCIAL IMPLICATIONS 5.1. The financial impactions are outlined in the relevant sections. The aim of the
proposals has been to balance the affordability for the Council and mitigating the financial impact to the individual of their contract of employment ending.
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APPENDIX 1
Agenda Item: Wolverhampton City Council OPEN EXECUTIVE
DECISION ITEM (AMBER) Cabinet / Cabinet Panel CABINET Date 15.11.2006 Portfolio(s) ALL Originating Service Group(s) RESOURCES, GOVERNANCE AND SUPPORT Contact Officer(s)/ B BAILEY
Telephone Number(s) EXTENSION 4500 Title EARLY TERMINATION OF EMPLOYMENT (DISCRETIONARY COMPENSATION) KEY DECISION: YES IN FORWARD PLAN: YES 1. Recommendations 1.1. Having regard to the pending change in regulations, age discrimination issues and
the need to have a balanced affordable severance scheme, it is suggested members consider the following changes to the Council’s position on awarding discretionary added years for pension purposes:-
(i) Reduction in the maximum of added years to four and a calculator of one sixth
as a general guide having considered the affordability of the Council’s scheme but with a proviso to consider a higher award in exceptional circumstances (e.g. financial hardship, personal difficulties, etc). Delegate to Director for Resources and Support and Chief Human Resources Officer consideration of appeals with a small financial impact (£20,000) and all others to the Appeals Panel.
(ii) When the new regulations are implemented, apply the same core scheme as
revised now in terms of benefits to the individual under the augmentation process.
(iii) Review the scheme in April 2008 in light of the new LGPS scheme that will be
introduced at that time. (iv) Recommend to School Governing Bodies that they adopt the Council’s policy
in response to the legislative changes being made in respect of members of the LGPS.
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APPENDIX 1 (continued)
EARLY TERMINATION OF EMPLOYMENT (DISCRETIONARY COMPENSATION)
1. PURPOSE OF REPORT 1.1. This report is submitted to enable Members to consider the Council’s practices of
awarding discretionary added years for pension contribution calculations. This follows consultation with local Trade Unions and reflects the need to respond to changing regulations, age discrimination and the affordability of any scheme.
2. BACKGROUND 2.1. The DCLG issued some months ago a consultation paper on proposed changes to
statutory regulations governing employers’ discretionary compensation. Consultations have taken place with local Trade Unions on possible changes to the scheme in light of the DCLG consultation paper, concerns around age discrimination and the need to meet a medium term funding gap by reviewing the affordability of the early retirement scheme.
3. DCLG’S CONSULTATION PROPOSALS 3.1. The main proposal of the regulation changes is to remove employer discretion to
award for pension purposes compensatory added years for those who are made redundant or retired on the grounds of efficiency over the age of 50, under the Discretionary Payments Regulations. Instead the draft Regulations propose to increase the maximum lump sum that can be paid in these circumstances to 104 weeks' pay from 66 weeks. The City Council has never exercised its discretionary power to pay a lump-sum under this existing Regulation.
3.2. There will, however, continue to be a statutory entitlement for an individual who is
made redundant to receive a lump-sum payment which is calculated having regard to the number of years continuous service related to a particular age band. The City Council has adopted a policy that the redundancy payment is based upon a maximum weekly pay of £300.
3.3. The Local Government Pension Scheme Regulations will, however, continue to
permit under Regulation 52 an employer to award added years for pension purposes in the event of redundancy and retirement on the grounds of efficient exercise of the service. This Regulation is not affected by the proposed amendments to the Discretionary Payments Regulations.
3.4. The main difference is that currently under the Discretionary Payment Regulations if a
member has completed at least 10 years service a maximum of ten compensatory added years can be awarded (limited to prospective service up to age 65 or up to a maximum of 40 years service at the date of retirement if less). Under Regulation 52 of the Local Government Pension Scheme the maximum number of compensatory added years that can be awarded is 6 2/3 years (note: this is the Authority's current policy under the Discretionary Payment Regulations). The use of Regulation 52 is more costly due to the different funding requirements.
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APPENDIX 1 (continued) 3.5. It was proposed that from 1 October 2006 these new Regulations would come into
force nationally and are aimed at removing any age discrimination in the current arrangements. The implementation has been delayed and is now expected to be 1 January 2007, although the proposals have led to a number of Councils to review and revise their policies.
3.6. Every employer has to publish a policy statement setting out how it intends to
exercise its discretionary powers and in particular on what basis it will award compensatory added years.
4. IMPLICATIONS FOR WOLVERHAMPTON (i) Current Scheme 4.1. Wolverhampton's current policy in respect of early retirement on the grounds of
redundancy and efficient exercise is to grant added years for pension purposes as follows:-
One third of reckonable service subject to a maximum of 6 2/3 years and not
exceeding service with Wolverhampton; also limited to prospective service up to age 65 or up to a maximum of 40 years service at the data of retirement if less.
4.2. Costs of granting added years resulting from voluntary redundancy over the last two
years have been:-
No. of Cases (% female)
One off Lump Sum Ongoing Pension Enhancement Per
Annum £000 £000 2004/05 45 (73%) 230 74 2005/06 * 42 (50%) 225 75 2006/07 # to date
34 (59%) 359 74
* Excludes downsizing prior to creation of Wolverhampton Homes. # Excludes part-time/casual Adult Education lecturers. 4.3. In many instances, the voluntary redundancy is directly linked to a service restructure,
and there are no on-going reduced employment costs to offset the costs of added-years enhancements.
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APPENDIX 1 (continued) (ii) Financial Issues 4.4. The current Scheme (PRC) is being stopped by regulation, therefore the only way to
enhance an individual’s pension is through the augmentation regulations if the Council wishes to continue with an enhancement scheme.
The two routes for enhancing a person’s pension have different payment profiles and
funding issues for the Pension Fund and employers. Under PRC the Pension Fund picks up some costs and the employing body makes an ongoing payment until the pension entitlement ceases. Under augmentation, employers pick up the costs.
4.5. The effect is that a reduced enhancement scheme under the augmentation regulation
is required if costs in the early years are to be broadly contained to match the current cost pattern. This will lead to a saving over the life of the pension payments. The containment of costs in the early years is on the basis that the Actuary agrees to a “funding scheme” broadly comparable to the current scheme (PRC) with employing bodies being able to pay an enhanced rate to create a retirement reserve for the pension fund costs covering the strain of early retirements. The Actuary has informally indicated that he is sympathetic to the issue.
4.6. An example of the early retirement costs is as follows:- Personal Data Date of Birth: 01/04/1948 Age: 58 Service: 30 years PRC enhancement: 6 2/3 years Alternative augmentation: 4 years Final Pensionable Pay - £15,000 p.a.
1st Year Cost
Annual Ongoing
Cost
Cost over 3 years to employer
PRC Strain on Fund £7,114# Lump Sum Enhancement £3,655~ Pension Enhancement £1,218~ £11,987 £1,218~ £14,423 AUGMENTATION Cost of Augmentation £14,852# Strain on Fund £8,062# £22,914# NIL~ £22,914 Phased funding of costs shown
say £15,000
# pension fund cost paid through additional employer’s contribution rates or lump sum “pay as you go” ~ direct employing body cost
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APPENDIX 1 (continued) 4.7. In summary, although it is possible to use a different regulation (Augmentation) to
award added years for the purpose of calculating pension benefits, a different payment profile arises under the regulations for similar cases. Therefore a reduction of the order of at least 40% to 50% in the award is required to produce a neutral effect over the short to medium term. This then produces a long term saving.
4.8. The other costs incurred are redundancy payments, the level at which these can be
paid is rising under the changes in regulations. Some authorities have or are considering moving to a scheme that just awards a redundancy payment but no pension enhancement with the option for the individual to buy added pension years by using their redundancy lump sum. A compensation payment equivalent to a maximum of 104 weeks pay is not equivalent to (up to) six and two thirds added years. Even so, a one-off payment of up to 104 weeks pay would lead to significantly higher one-off costs to authorities (like Wolverhampton) when compared to the annual payments that result under the "added years" approach. In such circumstances, many employers will be unable to set their compensation payments at the maximum permitted (104 weeks), and are likely to award a much lower number of weeks pay, if indeed any are awarded at all.
(iii) Equality Issues 4.9. The Government has raised concerns and acted upon a number of areas where there
is potential discrimination due to age and length of service being used to determine pension or state benefit. The approach phases in the changes, in order to recognise individuals approaching retirement who have been making arrangements around the long standing scheme need time to adjust. This is seen in the changes made by the Government to amend the 85 year element of the pension retirement regulation as it is considered to be potentially discriminating on an age basis. The Government has agreed following consultation with trade unions and employers to end the 85 year rule arrangement offering protection for a limited period (up to 2016 for staff reaching 60 years of age before then followed by a tapering of relief up to 2020). A further change will be made not later than 2010 to increase from 50 to 55 the earliest age at which an individual can, with their employer’s consent, receive a pension.
4.10. It therefore is appropriate to give consideration to phase out the current age related
scheme for working enhancements on an equivalent timetable to the Government at the latest.
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APPENDIX 1 (continued) 4.11. In examining equality data, a number of issues arise, in particular the age group now
approaching retirement are made up differently to the current workforce. As background information Wolverhampton City Council and overall West Midlands Pension Fund analysis has produced the following:-
Wolverhampton City Council Membership Data as at 31 March 1979
Overall Fund Statistics as at 31 March 2004 Early Retirement – Percentage of Age Group
Age Male Percentage
Female Percentage
60
24%
41%
61 15% 20% 62 21% 20% 63 22% 19% 64 26% 23%
A further significant issue is the continuing right for some females to claim their state
pension at 60 years of age. 4.12. LGE have circulated an advisory bulletin (515) on the proposed change in regulations
and in that it addresses the age discrimination problems highlighting the issues with continuing with the traditional pension enhancement scheme that differentiates between those under 50 years of age and those above, and calculates benefits relating to age and length of service. It states schemes could be used based upon age and length of service but they must be objectively justified. They offer no suggestion on how this might be achieved.
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APPENDIX 1 (continued) 4.13. It is clear there will be over the medium to long term a need to eliminate schemes that
discriminate on the basis of age and length of service. To make the changes at short notice with immediate effect is unfair and unreasonable for staff who will be affected over the next few years. The Government has recognised this issue for sometime and is phasing in the changes required. It is reasonable to therefore follow a similar approach. However, it does expose the Council to a potential challenge but this is evaluated as small but should be managed out over the short term.
5. LATEST POSITION 5.1. DCLG has not yet made the revised regulations and now appear unlikely to do so
until January 2007. 5.2. Recent changes to the Local Government Pension Scheme have introduced the
concept of flexible retirement where an individual will be able to receive their pension benefits but continue in employment either at a reduced contractual obligation or lower rate of pay. The Superannuation Committee, at its meeting held on 28 June 2006, reconsidered its policy regarding the abatement of pension following re-employment and has resolved to end abatement. This removes any penalty on those that retire and undertake new public sector employment.
5.3. Consultation has been undertaken with TU representatives on introducing a revised
scheme that continues to award added years under Regulation 52 of the Local Government Pension Scheme but the policy should be amended from granting one third of reckonable service to one sixth (subject to a maximum of 4 years and not exceeding service length within Wolverhampton). Further consultation then to follow on ending the age related element of any scheme after 1 April 2008. This has produced a formal response set out in the attached letter. In regard to the legality of any new scheme specifying a maximum number of added years, advise from the Council’s Chief Legal and Procurement Officer is, having financial guidelines for a scheme is acceptable provided there is always an opportunity to vary the core scheme in exceptional circumstances.
6. RECOMMENDATIONS 6.1. Having regard to the pending change in regulations, age discrimination issues and
the need to have a balanced affordable severance scheme, the following changes to the Council’s position on awarding discretionary added years for pension purposes are recommended:-
(i) Reduction in the maximum of added years to four and a calculator of one sixth
as a general guide having considered the affordability of the Council’s scheme but with a proviso to consider a higher award in exceptional circumstances (e.g., financial hardship, personal difficulties, etc). Delegate to Director for Resources and Support and Chief Human Resources Officer consideration of appeals with a small financial impact (£20,000) and all others to the Appeals Panel.
(ii) When the new regulations are implemented, apply the same core scheme as
revised now in terms of benefits to the individual under the augmentation process.
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APPENDIX 1 (continued (iii) Review the scheme in April 2008 in light of the new LGPS scheme that will be
introduced at that time. (iv) Recommend to School Governing Bodies that they adopt the Council’s policy
in response to the legislative changes being made in respect of members of the LGPS.
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APPENDIX 2
WOLVERHAMPTON CITY COUNCIL
EARLY TERMINATION OF EMPLOYMENT SCHEME
1. The Scheme is made under the Local Government (Early Termination of Employment) (Discretionary Compensation) (England and Wales) Regulations 2006.
2. The Regulations provide a new, simplified framework for the payment of discretionary
compensation to persons whose local government employment is terminated on or after 1st October 2006 by reason of redundancy or in the interests of the service or where a joint appointment comes to an end because one of the holders leaves. They revoke the Local Government (Early Termination of Employment) (Discretionary Compensation) (England and Wales) Regulations 2000 (“the 2000 Regulations”) but the revocation does not affect any person whose termination date is before 1st October 2006 or the rights of any person who is entitled to benefits under those Regulations in consequence of the death of such a person. In relation to such person the 2000 Regulations continue to apply.
Regulation 5 gives a power to increase a redundancy payment made under the
Employment Rights Act 1996, Regulation 6 allows an employer to award compensation in the form of a lump sum of an
amount that must not exceed 104 weeks’ pay. The regulation sets out the basis for calculating a week’s pay for an individual. Any redundancy payment under the 1996 Act or compensation paid under regulation 5 of these Regulations must be offset against compensation paid under regulation 6.
Regulation 7 requires each employing authority to have and publish a policy that they
apply in the exercise of their discretionary powers under regulations 5 and 6. 3. This scheme applies to those: (a) whose employment is terminated – (i) by reason of redundancy; (ii) in the interests of the efficient exercise of the employing authority’s
functions, or (iii) in the case of a joint appointment, because the other holder of the
appointment has left; (b) who, on the termination date, are – (i) employed by an employing authority, and (ii) eligible to be a Scheme member (whether or not he is such a member) or
would be so eligible but for the giving of a notification under regulation 8 of the Pensions Regulations; and
(c) whose termination date is on or after 1st October 2006.
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APPENDIX 2 (continued) 4. The Council’s scheme under regulations 5 and 6, power to increase statutory
redundancy payments and discretionary compensation will be as follows:- statutory redundancy payment based upon actual pay times 2.0. 5. For those staff whose LGPS pension becomes payable, the individual will not suffer any
actuarial reduction in benefits. Any individual can purchase added years for the purpose of calculating their LGPS pension, but on the basis that there is no cost to the Council.
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APPENDIX 3
THE TEACHERS AND LOCAL GOVERNMENT PENSION SCHEMES - POLICY STATEMENT ON FLEXIBLE RETIREMENT
1. BACKGROUND 1.1. The Teachers and Local Government Pension Schemes were amended with effect from
1 April 2006 to permit flexible retirement. 1.2. Flexible retirement allows a Pension Scheme member who has attained the age of 50
(55 after 1 April 2010) to request payment of their accrued pension benefits even though they have not ceased to be employed. This request can only be considered if the member of staff either reduces their working hours and/or their grade.
1.3. Payment of pension benefits under this provision is not automatic and can only be made
if the Council consents to that payment. There is no provision to subsequently withdraw benefits granted under this provision. The Local Government Pension Scheme also allows a member to build up new pension rights in the Local Government Pension Scheme based on the new hours and/or grade.
1.4. All permanent Council staff aged 50 (55 after 1 April 2010) and over and who are
members of the Teachers or Local Government Pension Schemes are eligible to apply for consideration under this policy.
1.5. When the Council gives consent the benefits will be paid in the same way as if the
employee had retired and any early retirement reduction of benefits will still apply. Reductions apply where an existing Pension Scheme member is under 65 and does not meet the 85 year rule.
1.6. The Council has the discretion to waive this early retirement reduction. However it is
envisaged that this discretion will not normally be exercised other than in exceptional circumstances (e.g. severe individual hardship or personal circumstances).
1.7. A suggested policy in respect of this discretion is shown at Appendix A, together with
details of a proposed guide to the Scheme. 2. FINANCIAL IMPLICATIONS 2.1. Allowing a member to receive their pension before achieving age 60 will create a strain
on the Pension Fund. This strain is currently met from an allowance already included in the employer’s contribution rate up to 31 March 2008. Examples of this strain on the Fund are detailed below at various service periods, salary levels and at ages 51-59. There is no strain on the Fund if an individual retires or takes flexible retirement at age 60 onwards.
granted where the cost to the Council can be recovered in not more than 2 years. 2.3. Members will recall that the Cabinet, at its meeting held on 28 February 2007, agreed
that with effect from 1 April 2008 no central provision will be made for the cost of early retirements/severances. These costs will be met by Service Groups. Central Provision to 31 March 2008 has been limited to the equivalent of one year’s salary for each early retirement, any additional costs to be met by the relevant Service Group.
3. EQUALITY IMPACT ASSESSMENT 3.1. The introduction of the concept of flexible retirement has been introduced into the Local
Government Pension Scheme by the Department for Communities and Local Government (DCLG). The DCLG has carried out a Final Regulations Impact Assessment and entered into a comprehensive consultation exercise with stakeholders. This exercise has involved gender, race and health impact assessments which have identified no areas of concern.
The Teachers and Local Government Pension Schemes Regulations 1997 (as amended)
Regulation 35 – Requirements as to the Time of Payment (Flexible Retirement)
With effect from 1 January 2008 a Scheme member who has attained the age of 50 and who, with their employer’s consent, reduces the hours worked or the grade at which they are employed, may elect in writing to receive, with their employer’s consent, their accrued retirement benefit notwithstanding the fact that they had not retired from that employment. Council Policy Applications to reduce their contractual hours or grade for members who have attained the age of 50 (55 after 1 April 2010) in order to enter flexible retirement will except, in exceptional circumstances, only be approved by the Director for Resources and Support, in consultation with the Chief Human Resources Officer, where the application is supported by the relevant Director and where the strain on the Pension Fund as a result of approving the flexible retirement can be recovered within a two year period and where the applicant has not previously had their pensionable service augmented by decision of their employer. Any early retirement reduction in benefits applicable as a result of flexible retirement will only be waived in exceptional circumstances.
Flexible Retirement Scheme
The Council’s flexible retirement scheme comes into effect from 1 January 2008. The Council values the knowledge, skills and experience of all its employees and recognises the benefits that flexible retirement may have for both the employees concerned and the Council as a whole. There is no right to flexible retirement and each application will be considered on its individual merits in light of service delivery needs, the benefits to the Council of the retirement and the overall cost to the Pension Fund. Except in exceptional circumstances a flexible retirement will only be approved where the cost to the Council can be recovered within a two year period and where the applicant has not previously had their pensionable service augmented by the decision of their employer. Employees who are granted flexible retirement will be able to receive immediate payment of their pension benefits whilst continuing to work for the Council on reduced hours and/or in a less senior position. Retaining employees in this way will allow the transfer of skills and experience to other workers within the Council. It may also enable employees who wish to relinquish their current level of responsibility to do so without having to leave the Council’s service. The Flexible Retirement provisions will be subject to review in light of any further changes to the Pension Scheme arrangements/Tax rules.
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APPENDIX A (continued) Flexible Retirement – Key Facts Flexible retirement may be granted to employees over the age of 50 (55 after 1 April 2010), who are members of the Teachers and Local Government Pension Schemes. In order to qualify for flexible retirement employees will be required to reduce their pay by at least 30%. This will normally be achieved by a reduction in working hours to say 2 or 3 days a week. However, it could be achieved by moving to a lower graded post if a suitable vacancy exists within the employee’s specific service area. The pension benefits payable on flexible retirement will be based on the employee’s actual service at the implementation date. The benefits will be reduced if the employee does not meet the 85 year rule (service + age = 85 years) and may be reduced in respect of service after 31 March 2008, depending on the age, service and protected rights applicable to the individual concerned. Employees who are granted flexible retirement may rejoin the Pension Scheme and build up further pension benefits based on their reduced hours/salary. This means that when the employee ceases to work altogether they will start to receive a second pension based on their subsequent period of service. Implications for Employment Conditions Employees will be required to sign new contracts of employment to reflect the agreed reduction in hours/grade and any revised duties or working arrangements. During the first three years of a flexible retirement no contractual amendments will be permitted (other than resignation/dismissal) and no additional payments can be made to the employee apart from the general pay award and incremental progression (if appropriate). This means that, apart from exceptional circumstances or where it may be mutually beneficial, no payment will be paid for any additional hours worked (including overtime) or additional duties undertaken (honoraria/acting up). Continuity of service will be preserved for entitlement to annual leave, sick leave etc, but will be calculated on the reduced working hours/pay as appropriate. Should the employee apply for another post within the Council then the 30% reduction in working hours/pay would be required to be maintained. If at the end of the three year period, a change in the employee’s working hours/grade is desired then prior agreement to the change must be obtained from the Director for Resources and Support in consultation with the Chief Human Resources Officer. Should the employee wish to retire from the Council’s service completely he/she will be required to give the Council the appropriate notice in writing. The Council’s normal retirement age is 65. However, subject to satisfactory performance and service delivery needs, employees may apply to continue working beyond age 65 up to one month before their 75th birthday. The Council’s other employment procedures and practices will continue to apply as normal.
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APPENDIX A (continued) How to apply for Flexible Retirement An employee who wishes to be considered for flexible retirement must complete the Application for Flexible Retirement Form and submit it no later than 3 months before the requested implementation date. This will allow sufficient time for the application to be fully considered and, if approved, for contractual changes to be made and pensions implemented. In considering the request, the following issues must be addressed:-
• There are clear benefits to the Council from the flexible retirement • There is no detrimental effect on service delivery/budgets • The arrangement proposed is fair and equitable to other team members • If appropriate, that there are suitable job(s) available within the Service area at a
lower grade. If the application is not supported the employee should be informed accordingly with the reasons. The employee will have the right to have his/her case reviewed by the Human Resources Panel.
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APPENDIX A (continued)
APPLICATION FOR FLEXIBLE RETIREMENT
PART 1 – To be completed by the employee Name: ________________________________ Payroll Number: _________________ Directorate: ___________________________________________ Division/Section: _______________________________________ Date joined Council: ____________________________________ In order to apply for flexible retirement and draw your pension benefits you must:-
• Be a current member of the Teachers or Local Government Pension Schemes • Be age 50 (55 after 1 April 2010) or over
• Be prepared to reduce the level of your pay by at least 30% - to be achieved by
reducing your working hours and/or grade • Agree to vary your contract of employment to reflect the changes in your working
arrangements and pay If you cannot meet the above requirements then you will not be able to apply for flexible retirement. Additionally, except in exceptional circumstances applications will only be approved where the cost to the Council created by a flexible retirement can be recovered within two years. Details of the relevant calculation can be obtained from your Human Resources Manager. If you do meet the above criteria and wish to proceed with your application then please complete the following:- Describe your current working pattern hours/days Describe the working pattern hours/days you would like to work in the future. In order to qualify for flexible retirement your proposal must achieve a reduction of at least 30% in your pay. This could be achieved by reducing your contractual working hours from say 35 hours to 23 per week.
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APPENDIX A (continued) If you wish to move to a lower graded post, there must be a suitable vacancy within your current service area. Please state the post and grade you wish to be considered for. State the date of which you would like your flexible retirement to be implemented. Please note that this must be at least 3 months from the date of your application. Describe how your proposed change will impact on service delivery and your colleagues. What benefits do you think will be achieved from your flexible retirement. Describe how the impact on your colleagues and service delivery can be best dealt with. Please give below any other information you wish to be taken into account by the Council in considering your application for flexible retirement. Signed: ____________________________________ Date: ____________________ When completed your application should be submitted for consideration. Your Manager will arrange to meet with you to discuss your application shortly. At this meeting you may be accompanied by your Trade Union representative or a work colleague.
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APPENDIX A (continued) PART 2 – to be completed by Chief Officer Having considered the application for flexible retirement a) I support the application (give reasons) b) I am unable to support the application for the following reasons: Signed: _______________________________ Date: ________________________ Chief Officer Comments of Director Signed: _______________________________ Date: ________________________ Director Supported/Not Supported Signed: _______________________________ Date: ________________________ Director for Resources and Support Confirmed Signed: _______________________________ Date: ________________________ Chief Human Resources Officer
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APPENDIX 4 EARLY RETIREMENT SCHEME – CURRENT POLICY
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