When an employee retires
Early retirement
Providing it is allowed for in the rules, an employee may retire before the normal retirement age set out in the scheme rules. When this happens, there are implications for both employer and employee.
Points to consider:
- Early retirement can't be forced on an employee, or it will be viewed as a dismissal in law.
- Voluntary early retirement means you don't have to pay notice or redundancy payments, though many companies do offer some form of financial incentive.
- The payment of any occupational pension may be brought forward if it's permitted by the legislation and the scheme rules.
- It is important that early retirement is viewed by both employer and employee as by mutual agreement.
- It is against the law to insist that a woman retires at a different age from a man.
- Consider whether you want to offer the option of early retirement to all employees above a certain age or only in certain instances.
- Bear in mind the effect that either decision will have on the motivation and commitment of your remaining workforce, including those who have applied and been refused.
Where early retirement has been agreed, it is good practice to provide written details of:
- the amount of occupation pension they will get and when it is to be paid
- the amount of any tax-free lump sum that is payable
- any other benefits that they are entitled to
Give the employee enough time to consider the offer and to respond to it in writing.
If your employees think they may have lost track of an old pension from a previous workplace, they may find it helpful to use the Pension Tracing Service - trace an old pension on the Pension Sevice website.
Subjects covered in this guide
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