Early retirement through redundancy or business efficiency
If you are aged 55 or over, your main benefits are payable immediately without any early retirement reductions if your employer makes you redundant or you are retired on the grounds of business efficiency and you have met the two years vesting period in the Scheme.
However, any additional pension paid for by Additional Pension Contributions or Shared Cost Additional Pension Contributions would be paid at a reduced rate if the retirement occurred before your Normal Pension Age (to take account of the additional pension being paid for longer).
If you were a member of the LGPS before 1 April 2014, the pension you built up before then is based on your final salary when you leave the Scheme. Also, any additional pension bought by Additional Regular Contributions would be paid at a reduced rate if the retirement occurred before your pre 1 April 2014 Normal Pension Age which, for most, is age 65.
If you are aged under 55 when you are made redundant or retired on the grounds of business efficiency, you will be entitled to deferred benefits. A deferred benefit is a pension benefit that is retained in the LGPS until it becomes payable or is transferred out of the Fund.
Please Note: Public Sector Exit Cap
It is the Government's intention to introduce a limit on termination payments for employees in the public sector, known as the '£95k exit cap'. The exit cap of £95,000 will most likely affect those members aged 55 or over who are made redundant or leave employment due to business efficiency. The '£95k exit cap' was implemented in November 2020 but was subsequently disapplied by HM Treasury in February 2021, as the regulations were not delivering the policy intent.
During late 2022, HM Treasury held a consultation on revisiting the restriction of public sector exit payments for those organisations classified as 'Central Government', which includes Academy schools and their support staff participating in the LGPS. Regulations with supporting guidance are awaited.
A further consultation on public sector exit payments for local authorities and other employers within the LGPS is expected during 2023, although an exact timeframe is unknown by the Fund.