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Early retirement policy and guidance

  1. Introduction
  2. Universities Superannuation Scheme (USS)
  3. University of St Andrews Superannuation and Life Assurance Scheme (S&LAS)
  4. Other retirement-related options
  5. Enhancement of early retirement benefits
  6. University permission for early retirement
  7. Guidance when considering early retirement
  8. Appendix

Introduction

The University recognises that in some circumstances members of staff may wish to retire earlier than the normal retirement age (typically 65). Indeed it is a fact that many university staff across the sector do opt for early retirement for a variety of reasons.

The University will consider any request for early retirement from a member of staff with at least 5 years’ service whose age falls within the ranges described below. It will also provide a confidential means by which a member of staff may enquire about such a possibility and the practical consequences of early retirement before formulating any formal request. Many members of staff considering early retirement will want fully to understand their entitlements before taking any concrete action. Given the recent changes of legislation in relation to pensions and consequential changes in pension schemes, up-to-date information is important. Staff are also encouraged to take independent financial advice from an FSA authorised adviser when considering their retirement options.

The University operates two distinct pension schemes, and most staff belong to one or the other. Because each pension scheme differs, the provisions are separately described below.

A. Universities Superannuation Scheme (USS)

  1. Under the USS pension scheme, any scheme member above the age of 63 years and 6 months, who has at least 5 years’ pensionable service, may take early retirement without any actuarial reduction in benefits, even if the retirement is without the consent of the University. (This means that, whilst the pension would only take into account the number of years of service acquired at the point of actual retirement, no additional reduction would be experienced simply for retiring—and beginning to receive benefits—before normal retirement age.)

    Members of staff in this age range seeking early retirement should contact the Pensions Administrator within Human Resources, for useful information on early retirement. This is completely informal and involves no commitment.

  2. Any USS scheme member between the ages of 55 years and 63 years 6 months, who has at least 5 years’ pensionable service, may take early retirement and receive benefits without the consent of the University. If the retirement early the scheme member may suffer an actuarial reduction in pension benefits. For staff in this age range, the University pledges that it would not unreasonably withhold such consent. The University does not have to compensate the USS scheme when it gives consent, so there is no cost to the University (in relation to USS) to be justified.

    Members of staff in this age range seeking early retirement should contact the Pensions Administrator within Human Resources, who will be able to provide an illustration showing the benefits that would be provided by the pension scheme along with other useful information on early retirement. This is completely informal and involves no commitment.

B. University of St Andrews Superannuation and Life Assurance Scheme (S&LAS)

  1. Most readers of this document who may be considering early retirement will have joined the S&LAS scheme prior to 1 May 2008. If so, and the member of staff is age 60 or above, the member of staff is entitled to retire before the normal retirement age. The permission of the University is not required. The member of staff will also not suffer any actuarial reduction in his/her pension benefits. (This means that, whilst the pension would only take into account the number of years of service acquired at the point of actual retirement, no additional reduction would be experienced simply for retiring—and beginning to receive benefits—before normal retirement age.)

    Members of staff in this age range that wish to consider early retirement are encouraged in the first instance to contact the Pensions Administrator in Human Resources, in order to receive information on the benefits they would receive. This is completely informal and involves no commitment.

  2. If the member of staff joined the S&LAS scheme prior to 1 May 2008 and is in the age range of 50 (increasing to 55 from 2010) to 60, then the S&LAS pension scheme allows early retirement but there will be an actuarial reduction to the pension benefits.

    Members of staff in this age range that wish to consider early retirement are encouraged in the first instance to contact the Pensions Administrator in Human Resources, in order to receive information on the benefits they would receive. This is completely informal and involves no commitment.

  3. For members of staff who joined the S&LAS scheme after 1 May 2008 and are considering early retirement some of the details relating to early retirement have been modified. Full information may be obtained from the Pensions Administrator.

C. Other retirement-related options

In addition to early retirement there are a number of other options that can be considered by an individual in relation to their working pattern.

  1. Winding down

    The University will consider a period of “winding down” prior to early retirement. “Winding down” is when the member of staff remains employed but undertakes a reduced remit of duties/less senior position which in turn will impact on current salary/grading. Depending on the pension scheme and the duration of the reduced remit, this may have an impact on the overall pension of the member of staff. Under the USS scheme the pension can be calculated using the highest revalued salary** averaged across any three consecutive years over the last thirteen years. The same mechanism does not apply to the S&LAS scheme. Winding down can be tied into Early Retirement where there is a tangible benefit to the University and such a benefit can be linked to the criteria listed in Section E below.

    Another variation of “winding down” is where there is a reduction in hours of work prior to retirement, rather than a change of duties. The pensionable salary will still be based on the full-time salary of the member of staff, but by reducing the hours of work the pensionable service is reduced to reflect the number of hours worked. So if the member of staff is currently employed on a full-time basis and reduces this to half time, the pensionable service, in a 12 month period, will be reduced from 365 days to 183 days. Those interested are strongly encouraged to consult the Pensions Administrator regarding the likely effect upon pension benefits and to seek independent financial advice.

    ** revalued according to the Retail Prices Index.

  2. Re-engagement

    Re-engagement may be permitted under the terms of this policy at the discretion of the University and in accordance with any regulations and/or conditions applied by any external body. Re-engagement is where the member of staff retires from the University and therefore has access to their pension but is re-employed by the University on a reduced hours/different duties contract. The University may support re-engagement because it allows for service levels to be maintained by the University or because it allows new staff to be trained by recently-retired staff in a managed way.

  3. Flexible working

    Flexible Working allows parents (including adopters, guardians and foster parents) and carers to request to vary their working arrangements to a more flexible working arrangement under The Flexible Working Regulations 2002. It is not an automatic right as there will always be circumstances when the University is unable to accommodate the desired work pattern. Further information on flexible working can be found at: Flexible working policy

  4. Ill health retirement

    There are separate provisions for early retirement due to ill health. Information about this is available from Human Resources.

D. Enhancement of early retirement benefits

In some cases, regardless of the age of early retirement, the University’s interests may be served by enhancing the retirement benefits (such as purchasing extra years of service) that would be provided to an individual either through the main pension scheme or through associated AVCs. There is no entitlement to such enhancements, and any enhancement will be at the sole discretion of the University. Additionally, enhancement will only be applicable where:

  • the member of staff has more than 5 years’ continuous service with the University, and
  • the enhancement will be within the allowances set by the relevant pension scheme and current legislation, and
  • significant benefit to the University will result.

The University will monitor enhancements annually to ensure probity in such arrangements.

E. University permission for early retirement

If a request for early retirement requires University permission, the individual should meet with the relevant Head of School/Unit to discuss their proposals fully and to ascertain the likely cost implications for the University. Advice can be sought by both parties from the Pensions Administrator or an HR Officer. If there are cost implications for the proposed retirement or the individual is seeking an enhancement (see Section D), the Head of School/Unit must submit a case outlining the benefits to the University and indicating whether the application for early retirement is supported. The case for early retirement should consider the following and should be submitted to the Director of Human Resources using the Early Retirement Application Form (Word, 66 KB).

Typical Criteria for Cases Involving University Permission (list not exhaustive)

  1. Cost savings

    The post will:

    • not be replaced or not be replaced immediately; or
    • will be replaced at a lower grade; or
    • will be replaced at a lower FTE.
  2. Efficiency

    The retirement will provide an opportunity to re-design/restructure the post to achieve greater organisational efficiency.

  3. Re-structure

    The retirement will allow for the re-organisation of the structure of the School/Unit to engage in new activities or provide new services.

Where cost savings are sought, the University, in considering early retirement applications, must normally be satisfied that the cost to the University of the early retirement is recouped within a maximum of 3 years of the retirement taking effect.

Where re-structuring is sought, the University will need to be satisfied that any new developments will contribute to the University’s strategy, either at institutional or at School/Unit level.

The University will normally expect the support of the School/Unit for the early retirement.

The University will consider all applications carefully but reserves the right at its absolute discretion to refuse any application for early retirement for which its permission is needed.

Guidance when considering early retirement

Early retirement benefits

Any member of staff considering early retirement is encouraged to approach a Human Resources Officer, on a confidential basis, to discuss the proposal. The Human Resources Officer can obtain the necessary information and provide general guidance to the member of staff on early retirement and specific details of the benefits that would be received. The member of staff would also have the opportunity to raise any other concerns/issues on a confidential basis.

For early retirement, just as for retirement at normal retirement age, there are many options in terms of how pension benefits are received. Legislation now allows for the member of staff to elect to take more of the pension as a lump sum than is standard with the USS and S&LAS schemes. The member of staff has the option also to transfer more benefits to a spouse/partner if relevant. In addition to the general information that is available from Human Resources, the member of staff is encouraged to take independent financial advice in order to discuss individual circumstances. The University is unable to offer financial advice to individuals.

How to apply for early retirement

Once the member of staff has obtained the necessary information from the Pensions Office and has taken the decision to proceed with an application for Early Retirement, the member of staff should discuss this matter with the relevant Head of School/Unit.

Age 60 and above (USS & S&LAS*)

As stated in A(i), A(ii) and B(i), a scheme member in this age range can retire at any time. The consent of the University is not required for retirement, but the member of staff should simply discuss his/her intentions with the Head of School/Unit and formalise the request for early retirement by submitting a letter to him/her, copied to the Director of Human Resources, with the proposed date for the start of the retirement.

As noted in A(ii) above, however, members of the USS scheme who are above age 60 but below age 63 years 6 months may wish University consent in order to avoid an actuarial reduction in pension benefits. In this case, the Head of School/Unit should provide an accompanying letter to the Director of Human Resources requesting that University consent be given. It is not necessary to provide any supporting case for consent in these circumstances. If there were some compelling reason to withhold consent, then this would need to be stated and justified by the Head of School/Unit.

* who joined the scheme prior to 1 May 2008

Aged between 50 and 60 (USS)

As stated in A(iii), the permission of the University is required for any retirement in this age range as the University must pay USS the cost of removing any actuarial reduction. The member of staff must therefore discuss his/her intentions with the Head of School/Unit, who will be required to outline the case for early retirement and how any costs associated with the early retirement will be recouped as outlined in Section E above. The Head of School/Unit will require the necessary financial information from the Pensions Administrator to process the application. The request of the member of staff for early retirement (specifying the starting date for retirement) and the letter from the Head of School/Unit justifying the case for early retirement should both be sent to the Director of Human Resources. If the Head of School/Unit is unable to support the case for early retirement, this also must be reported in writing to the Director of Human Resources.

Aged between 55 and 60 (S&LAS)

As stated in B(ii), the member of staff does not need the permission of the University to retire, but there will be an actuarial reduction to the pension benefits. The member of staff should discuss his/her intentions with the Head of School/Unit and formalise this by submitting a letter to him/her, copied to the Director of Human Resources, with the proposed date for the start of the retirement.

Queries

For further information, on a confidential basis, regarding Early Retirement please contact:

Important note

The University and the pension funds (USS and S&LAS) are separate entities. The trustees of each pension scheme set the rules for the scheme, and they may change the rules at any time. Therefore the provisions described in this Early Retirement Policy may be subject to change by the relevant pension schemes, and it is essential that up-to-date information is gathered before any decision is made.

If there is any conflict between what appears in this document and the rules of USS or S&LAS pension schemes, the rules of the pension scheme and the decisions of its trustees take precedence. Human Resources

Appendix