Flexible Retirement

A change in the Finance Act 2004 introduced flexible retirement from 6th April 2006, allowing people in occupational pension schemes to continue working while drawing their pension, where the scheme rules allow it.

Members wishing to reduce to part-time employment prior to retirement could be allowed to draw part (or all) of their entire pension early and then supplement their part-time salary with pension income.

This could be attractive to both employers and employees.  It allows employees to alter the balance of their working and personal lives and prepare for full retirement. Flexible retirement gives employees a choice of the date on which they take their full retirement; using gradual retirement, in which the transition from full-time work to retirement is made through a period of part-time working.

Employers can benefit from flexible retirement

Flexible retirement can deliver the following benefits for employers:

• Retention of experienced staff with valuable skills;

• Helps businesses to prepare for the loss of employee skills.

• The creation of a wider pool of expertise for recruitment by including those aged 55+

• Enabling the organisation to increase its public image to make it a preferred employer;

• A strategic and effective response to demographic change, as the pool of younger people entering employment varies from time to time;
 
• Equality of opportunity and fairness for all employees.

For employers, gradual retirement could be a means of reducing capacity without losing the people concerned or the qualities, know-how and expertise they bring to the business. It can also provide a means of passing on skills and experience from older to younger workers.

A note of caution. Starting your pension early before normal retirement age will mean the benefits will be reduced because they are being paid over a longer period.  You should get the figures showing how much pension you will receive before making a decision. Once an early retirement pension starts, apart from inflation increases, it continues at that rate for your lifetime.

Usdaw advises members not see flexible retirement simply as a way of being able to draw upon the lump sum that pension schemes offer at retirement but to take a long term view of what is best for themselves in their later years.

Earning extra pension

The ideal flexible retirement arrangement would allow members to continue to earn extra pension rights while working on, after starting to draw their pension. This model is perfectly possible but is likely to involve administrative complications that may initially be off putting for employers. This situation needs to be addressed in talks with employers about introducing flexible retirement.

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© 2003 (USDAW) Union of Shop, Distributive and Allied Workers
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