Flexible retirement

Flexible retirement is a scheme that allows employees, with University approval, to achieve a mix of retirement and continuity at work. The employee reduces their work and gives up part of their salary in exchange for part payment of their pension benefits.

For the employee, the benefits can include an improved work-life balance or freeing up time for caring or other responsibilities without taking the full financial penalty that can come with going part-time or leaving work altogether. It is also a way of tapering towards eventual full retirement rather than facing the ‘cliff edge’ of going straight from full-time work to full-time retirement.

For the department, flexible retirement offers a means of retaining key staff who might otherwise be lost to full retirement and of smoothing transitions and succession planning.  It may also be a feature of managing EJRA requests where a department and the employee would like the employee to continue beyond the EJRA in part, but not all, of their previous role.

Flexible retirement is available to members of University Support Staff (USS) and the Oxford Staff Pension Scheme (OSPS) defined benefit section. (The scheme applies differently to members of the OSPS defined contribution scheme, please contact the Pensions team for information). These guidelines are based on the detailed rules applicable to those schemes.

Note: if the staff member holds a work visa, a change in hours or role may well require a fresh application for a work visa to be made. Tier 2 work visa holders who are considering flexible retirement must consult the Staff Immigration Team at the earliest opportunity.

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Members of staff can request flexible retirement in accordance with the Rules of the pension scheme to which they belong.

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An outline of the University Support Staff (USS) rules on flexible retirement can be found on the USS website

Information for multiple appointment members can be found in the Flexible Retirement factsheet available from the USS website.

OSPS defined benefit section

The formal Oxford Staff Pension Scheme (OSPS) OSPS Rules permit flexible retirement in accordance with this policy.

OSPS defined contribution section

Flexible retirement applies differently to the Decision and Considerations section below: please contact the Pensions team for advice.

Other pension schemes

Other pension schemes, including the NHSPS, offer flexible retirement. Members should seek information from the scheme administrator or the Pensions Office.

An outline of the NHSPS flexible retirement options can be found on the NHS website.

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Eligibility

Active members of USS or the OSPS defined benefit section aged 55 or over with at least two years of qualifying service in the scheme may apply for flexible retirement.

  • Employees on variable hours contracts are excluded from flexible retirement.
  • There is no upper age limit to eligibility – an employee who has passed the normal pension age may still apply for flexible retirement.
  • The scheme applies differently to members of the OSPS defined contribution section: contact the Pensions team for information.

Criteria

Any request for flexible retirement should include:

1. How much pension the employee wishes to take

  • The employee can ask to take between 20% and 80% of total standard pension benefits, in increments of 5%.
  • The employee may request two flexes before taking full retirement.
  • If the employee takes 80% of pension at the first flex, a second flex is automatically precluded – the next step is full retirement.
  • If the employee wishes to keep open the option of a later, second flex before full retirement, they may only take a maximum of 75% of pension at the first flex.
  • A second flex can request taking another portion of pension provided that, when added to the amount taken at the first flex, the total does not exceed 80%.
  • If the employee takes any pension before their Normal Pension Age (see the relevant pension scheme rules), the amount of benefit will be reduced for early payment. If the employee is a member of USS who joined USS before 1st October 2011, or is a member of OSPS who joined OSPS before 1st August 2004, the reduction will apply only if the employee takes pension before age 60. Employees should be encouraged to get pension forecasts from Pensions Office.

2. By how much the employee wishes to reduce salary

  • The employee must reduce salary by at least 20%.
  • This may be achieved by the employee asking to work fewer hours, in steps equivalent to a half-day (ie 10% or 0.1 FTE for a full-time worker).
  • For a full-time worker a reduction in salary of 20% would be the equivalent of moving to a four-day week.
  • The necessary change in working pattern may also entail a change of role or grade (see Considerations).
  • The reduced salary (plus any general pay award) has to apply for at least 12 months.
  • A subsequent flex must include a minimum further 20% salary reduction.
  • USS multiple appointment members only - the employee must reduce the aggregate salary from all pensionable posts by at least 20% and this change in salary must be matched by a similar reduction in overall working commitments or hours.

There is not a fixed ratio between the amount of pension taken and the amount of salary reduction.

3. Date when the employee wishes to start flexible retirement

  • USS and OSPS require formal notification at least two months before the intended starting date of the flexible retirement arrangement, so it is imperative that the Pensions Office receives formal notification in good time to meet this pension scheme requirement.
  • A request for flexible retirement should therefore be agreed at least three months before the intended starting date.

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Best practice is for the employee and department or division to have informal discussion of the employee’s wish for flexible retirement.

  • This allows both parties scope to explore options and to negotiate and agree an acceptable arrangement.
  • This suggests that the process of applying for flexible retirement should start several months before the desired start date.
  • Consultation with the Pensions Office can help inform these discussions.

Discussion of final retirement

A flexible retirement request could be agreed as part of a package which includes voluntary agreement on a subsequent, second flex (if requested) and on the employee’s final retirement at a specified date in the future.

  • In such cases approval of the package would entail department and employee each making a binding commitment to vary the contract on at least one occasion (ie implement the ‘flex’) and to final retirement on an agreed date. The agreed package would include notice of retirement by the employee ie a resignation letter.
  • The agreed final retirement date could be at any future date, provided that it was at least 12 months after the first flexible retirement ‘flex’.
  • Any subsequent change to the agreed package, including to the final retirement date, would have to be agreed by both employee and the department.
  • Such a package could introduce a welcome degree of certainty into retirement and succession planning in the case of those staff who no longer have a fixed retirement age (as and when flexible retirement becomes available to them). 
  • Clarity from the employee about how long a period of flexible retirement is intended to last could make it easier for a department to assess and mitigate the impact that approval of a flexible retirement request would have on its business going forward.
  • Agreement on such a package is voluntary. Departments should not use a flexible retirement request as a means of compelling staff to agree to a fixed retirement date.

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After informal discussions, the employee makes a formal request for flexible retirement in writing

  • for academic staff, the request should go to the divisional secretary for consideration by the head of division
  • for other staff, the request should go to the departmental administrator for consideration by the head of department
  • where the request is for a first or second flex, without reference to final retirement the employee should use Model letter FR1 where the request is part of a package which includes agreement on a date for final retirement, the employee should use Model letter FR2 where flexible retirement forms part of a request to continue working beyond the EJRA, it should be requested as part of the EJRA package and not separately.

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Decision

Flexible retirement may only be granted with the consent of the University.

Requests linked to the EJRA

Where a flexible retirement application forms part of a request to continue working beyond the EJRA, the decision on the EJRA application will be taken by the EJRA panel, as part of the EJRA procedures.

Other requests

In all other cases, it is for the head of division (for academics) or head of department (for other staff), in consultation with others as appropriate, to decide whether or not flexible retirement would serve the best interests of the University.

All requests should be given timely and careful consideration and should not be rejected unreasonably, but:

  • the division or department may reject an application outright; or
  • the division or department may require a change in the nature of the request as a condition for acceptance; or
  • the division or department may wish to link approval of a flexible retirement request to an agreement on the applicant’s eventual full retirement date.

Considerations

In deciding on a request the division or department should take into consideration its business needs and the potential impact on the applicant’s work colleagues as well as on the employee making the request.

Delivery

  • Can the department cover the employee’s reduced workload through recruitment, a re-organisation of work or the cutting of some tasks? Or would accepting the employee’s request have an unacceptable impact on the quality or delivery of the department’s work? Does the department need to ask for a modification in the request? For example, the department might want the employee to reduce hours to three days rather than four to allow the increased possibility of a job share.

Cost

  • Does employee’s request simply entail a saving in salary, or are there factors which mean that the costs of filling the resulting gap are higher than the savings?

Impact on colleagues

  • Can the employee’s request be accommodated without detrimental impact on the employee’s work colleagues?

Quality of work

  • Can the employee’s request be met by simply reducing their working hours in the same role, or does it entail a change in the nature of the work they do, or even a move to a different post? If it is only possible to achieve the reduction by taking a discrete element out of the employee’s duties, does this leave sufficient work of the right quality? Are there any implications for grading?

Personal circumstances

  • Are there exceptional personal circumstances relevant to the request which need to be taken into account?

Timing

  • Are there any factors such as major events or key dates in the business cycle which might influence when the department would want the flexible retirement to start? How does the application fit with any plans the department has for re-organisation? 

Planning

  • Would it be helpful to the department, for succession planning reasons, or to the employee, for retirement planning purposes, to link discussion of flexible retirement to decisions about eventual full retirement?

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Communication

The decision should be communicated in writing to the employee by the appropriate divisional secretary or departmental administrator

  • approved requests must also be communicated in writing to the Pensions Office at the earliest opportunity.
  • departments should issue new contracts or contract variations, as appropriate, and ensure that CoreHR records are updated.

The following model letters are available:

  • Request approved, change in working pattern requires a contract variation – use Model letter FR3
  • Request approved, change in working pattern requires a new contract – use Model letter FR4
  • Request rejected –use Model letter FR5.

Appeal

There is no appeal against a divisional or departmental decision on a flexible retirement request but an employee who believes that his or her request was not handled reasonably may raise a grievance in the usual way.

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The Pensions Office can provide flexible retirement pension forecasts and information on the application of USS, OSPS and other Rules.

The Pensions Office can provide an illustration which shows how flexible retirement would apply in an Example of flexible retirement (downloadable from the right-hand side of this page)

Financial advice on pensions and other matters must be obtained from an Independent Financial Adviser.

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