DRAFT EARLY RETIREMENT

Transcription

1 Appendix 1 OD & HR POLICIES Organisational Development & Human Resources DRAFT EARLY RETIREMENT POLICY

2 Appendix 1 page 2 1. INTRODUCTION 1.1 This policy takes account of the Local Government Pension Scheme (Benefits, Membership and Contributions) (Scotland) Regulations 2008 (As Amended), the Local Government Pension Scheme (Administration) (Scotland) Regulations 2008 (As Amended), the Local Government (Discretionary Payments and Injury Benefits) (Scotland) Amendment Regulations 2009 and Employment Rights Act 1996 (As Amended). 1.2 The Council recognises that there are some circumstances where it is in the interests of the Council for employees to be allowed to retire earlier than normal retirement age. The early retirement policy assists the Council in meeting that objective and of providing services which are responsive, efficient, reliable and effective. In addition to early retirement, this policy covers discretionary compensation arrangements for employees volunteering for redundancy who are not eligible for pension benefits. 1.3 The types of early retirement are; Redundancy: where the number of people required is reduced because of changes to workload, organisation, service provision, new technology or other reasons. Business efficiency: where retirement achieves savings and/ or, improved service delivery but does not result in an overall reduction in the number of posts. Normal requests from employees to retire early: (this includes Rule of 85) Compassionate grounds: where, in exceptional circumstances, an employee has a caring or has other significant responsibilities or is suffering extreme financial hardship. Flexible retirement: can improve an employee s work life balance and help retain experienced and skilled employees by extending working life. Flexible retirement is available where an employee chooses to reduce hours in a current post or chooses to apply for a lower graded post. 1.4 Early retirement on the grounds of business efficiency or redundancy would normally only be available in circumstances initiated by the employer and would be considered after other alternatives have been explored. 1.5 There is a general presumption by the Council against early retirement where a business case does not demonstrate a financial efficiency. 1.6 The Council s Internal Pensions Panel will consider all business cases on their merits. In abnormal situations such as reorganisations, the Council may resolve to take a different approach and will be subject to review.

3 Appendix 1 page Where there is a request for more than one early retirement from the same department as part of a departmental restructuring then business/financial efficiency must be demonstrated for each individual case. A business case which is underpinned by the savings of another early retirement(s) will not normally be approved. 1.8 The date agreed with an employee for termination of their employment will normally be planned to take effect on or after the period of notice which the Council is required to give in such circumstances. In exceptional circumstances a shorter timescale may be agreed between the employee and service. 2. SCOPE 2.1 The Scheme applies to all employees of the Council regardless of age, however; only employees aged 55 (or 50 in some circumstances) and who are members of the Local Government Pension Scheme (LGPS) will be entitled to the release of pension benefits. 2.2 Early retirement requests from chief officers will initially be considered by the Chief Executive. If recommended for approval a report will be submitted to Full Council for a decision. 2.3 An early retirement request from the Chief Executive will initially be referred to the Council s Monitoring Officer, Section 95 Officer and Head of Organisational Development and HR. If recommended for approval, a report will be submitted to Full Council for a decision. 3. SCHEME BENEFITS 3.1 Redundancy Initial approval of a request for early retirement is at the discretion of the service and will be determined by the needs of the service. Scheme members may be granted discretionary additional membership by Compensatory Added Years (CAY). Eligible employees may be entitled to a redundancy payment and/or a discretionary compensation payment (DCP) A DCP will only be payable in circumstances where no award of added years is made and will be calculated using the formula for statutory redundancy payments multiplied by 2.2 (up to 66 weeks).employees who are able to access their pension benefits will be able to choose one of the following flexible options; Option 1 maximum CAY s is 6 2/3 rd years (awarded in accordance with scheme regulations) and a statutory redundancy payment not exceeding 30 weeks; Option 2 no CAY s awarded. A DCP payment of up to 66 weeks may be payable. All options are subject to affordability Redundancy and compensation payments will be based on actual salary

4 Appendix 1 page 4 The early retirement must result in a saving to the Council once all costs have been considered within 3 years of the retirement. Employees who have flexibly retired will have eligibility for CAY s based on service and membership after flexible retirement only. Employees who meet the eligibility requirements will not have an actuarial reduction under pension scheme rules. Where there are costs to the Council, requests will be assessed against business case criteria and individual circumstances. An employee who volunteers for redundancy and is under age 50 will not be eligible for release of pension. However, they may still be eligible for a DCP provided they have a minimum of 2 years qualifying service. 3.2 Business Efficiency Initial approval of an early retirement request is at the discretion of the service and will be determined by the needs of the service. Scheme members may be granted discretionary additional membership by Compensatory Added Years (CAY). There is no eligibility for a DCP or statutory redundancy payment CAY s will be limited to 6 2/3 rd added years (awarded in accordance with scheme regulations) The early retirement must result in a saving to the Council once all costs have been considered within 3 years of the retirement. Employees who meet the eligibility requirements will not have an actuarial reduction under pension scheme rules. Where there are costs to the Council, requests will be assessed against business case criteria and individual circumstances. 3.3 Normal requests (including Rule of 85) Where no consent is required an employee may retire before normal retirement age by giving appropriate notice. Where consent is required approval is at the discretion of the service. There is no entitlement to CAY s, statutory redundancy payment or DCP. Where there are costs to the Council, requests will be assessed against business case criteria and individual circumstances. 3.4 Compassionate retirement The grounds for release of pension is either; extreme financial hardship and/or to provide constant care for an immediate family member Requests from employees or exemployees will be considered on a case by case basis by the Council s Internal Pensions Panel based on cost, service delivery and the personal circumstances of the individual

5 Appendix 1 page 5 Actuarial reduction may be waived where justified on exceptional compassionate grounds 3.5 Flexible Retirement 4. COSTS Flexible retirement must result in a reduction by at least 20% of original salary Flexible retirement is at the discretion of the service Flexible retirement decisions should be justifiable as beneficial to service delivery Each application will be decided on its own merits Actuarial reduction may be waived in whole or in part where it is in the interests of the Council to do so Where there is a cost to the Council then the decision to approve the flexible retirement request will be made by the Council s Internal Pensions Panel. 4.1 The employing service will meet all costs of each early retirement. There are, potentially, two costs to be considered: Costs to reimburse the strain on the fund. Payment may be made as a single instalment or in equal instalments over a period not exceeding 3 years following the date of retirement. Cost of added years, redundancy payment or DCP. The cost of added year s pension will be met over the lifetime of the employee and any dependant. The DCP, redundancy payment and added year s lump sum will be paid immediately on retirement. 5. GOVERNANCE ARRANGEMENTS 5.1 It is important that the Council takes account of Audit Scotland and other best practice in setting out the governance arrangements for dealing with retirements. In order to ensure openness and transparency, value for money, accountability and fairness, the following governance arrangements should apply: Applications for early retirement should be processed at the earliest possible opportunity. Once a retirement is agreed then the termination date must allow for the period of contractual notice to be worked subject to para 1.8. The Director should advise at the time the application is made of the prospective retirement date. 5.3 Management controls have been strengthened to ensure projected savings are realised. The Head of Finance will assess all relevant factors to ensure projected savings are being delivered as promised. 5.4 To ensure transparency and accountability, early retirement requests for chief officers will be approved by Full Council. Each committee report must set out the full business case. In addition, detailed information on options for added years and a review of any specific conditions which may have been

6 applicable to the employee concerned must be included. In instances where there is more than one early retirement then all financial and operational information must be clearly reported on an individual case basis. 5.5 Where a decision has been taken by the Full Council to award compensatory added years, Council minutes will record the number of added years granted. 5.6 Detailed reporting on the Scheme will be presented to the Council s Pensions Sub Committee on an annual basis including scrutiny of the scheme. 6. MONITORING AND REVIEW 6.1 The early retirement scheme will be subject to regular review to ensure it remains fit for purpose. Regular reviews will be carried out by the Head of Organisational Development & HR to ensure fairness and consistency of application. 6.2 An annual report on the operation of the scheme (capitalised costs of the scheme) will be made to the Council s Pensions Sub Committee Appendix 1 page 6