Retirement options modified 2006 to 2015

Voluntary retirement

The normal pension age from the 2015 Fire Pension Scheme is age 60. This is the earliest date that you could leave active employment and receive all of your benefits in full.

If you have transitioned from the 2006 Modified Fire Pension Scheme into the 2015 Fire Pension Scheme your pension will be made up of two sets of benefits. You can make different decisions for each set.

2006 Modified pension

Your 2006 Modified pension is payable at age 55. This is the date that this portion of your benefits is payable in full.

2015 benefits

Your 2015 pension is payable at age 60. This is the date that this portion of your benefits is payable in full.

If you retire before age 55 there is no option to have your 2015 benefits paid immediately and they would become a deferred pension; payable in full at State Pension Age.

If you retire between age 55 and 60, rather than having your 2015 pension paid immediately with reductions, you could choose to defer it. This means that your 2015 pension only would be a deferred pension; payable in full at State Pension Age.

If you retire from age 55, it is possible have your 2015 benefits paid immediately but they would be subject to percentage reductions. These reductions are based on the number of years and months between your age at date of retirement and age 60 and reduce the closer you get to age 60.

The early retirement reduction factors for an retirement from active service can be found in section 2 of the GAD guidance - Early payment reductions.

Example – How an early reduction percentage is worked out for active retirement

A: Age at date when benefits are paid = 55 years 0 months

B: Normal Pension Age = 60 years

Number of years and months between A and B = 5 years 0 months

Early reduction factor = 0.787

Percentage reduction = 1 - 0.787 = 0.213 x 100 = 21.3%

Ill health retirement

You may receive your pension early if you have to leave your job because of ill health. Speak to your employer if you think you may be entitled to receive your pension on ill health grounds. It is the employer’s responsibility to determine if you are entitled to an ill health pension.

The conditions which have to be met for an entitlement to an ill health pension are as follows:

For a Lower Tier Ill Health Pension you must:

• have a minimum of 3 months qualifying service
• be incapable of performing any of the duties of the role in which you were last employed, because of incapacity of mind or body which will continue until normal pension age (60)

For a Higher Tier Ill Health Pension you must:

• have a minimum of 5 years qualifying service
• be entitled to a Lower Tier Ill Health Pension
• also, because of incapacity of mind or body which will continue until normal pension age, be incapable of undertaking regular employment*.

*Regular employment means employment for at least 30 hours a week on average over a period of not less than 12 consecutive months, beginning with the date on which the issue of your capacity for employment arises.

A Higher Tier Ill Health Pension is payable immediately, with no reductions and will be based on the Lower Tier Ill Health Pension plus an enhancement of 2% of the gross Lower Tier Ill Health Pension before any commutation multiplied by your assumed period of pensionable service from date of retirement to normal pension age.

Example – Lower Tier Ill Health Pension

Earned pension before commutation = £10,000

Pension after commutation = £8,000

Annual pension payable = £8,000

Example – Higher Tier Ill Health Pension

Earned pension before commutation = £10,000

Pension after commutation = £8,000

Period of assumed pensionable service from date of retirement to age 60 = 20 years

The Higher Tier Ill Health Pension element is calculated as:

Lower Tier Ill Health Pension + 2% x earned pension before commutation x period of assumed pensionable service

= Lower Tier Ill Health Pension + 2% x £10,000 x 20

= £8,000 + £4,000

Total gross pension payable = £12,000

Exchange pension or lump sum (Commutation)

When you retire, you can if you wish, exchange part of your annual pension entitlement to receive a lump sum payment. This is called commutation.

If you have transitioned from the 2006 Modified Fire Pension Scheme into the 2015 Fire Pension Scheme your pension will be made up of two sets of benefits. You can make different decisions about your commutation for each set.

2006 Modified benefits

The commutation factor is based on your age in years and complete months at the date of retirement.

The commutation factors for retirement from 2006 Modified Fire Pension Scheme can be found in the Legislation - commutation on retirement for special members and the extended retirement tables.

You can either:

• Elect to commute the maximum HMRC amount allowed, or
• Commute any amount of your choosing (up to the maximum allowed), or
• Commute nothing

Example – Calculating the Maximum HMRC commutation

Gross retirement special annual pension = £8,000
Age at date of retirement = 55 years 0 months
Commutation factor 20.8
Commutation option = maximum

Calculating the maximum special pension that can be commuted

Total value of crystallised benefits = £8,000 x 20* = £160,000
(* 20 is a factor set by HMRC)
Commutation Factor x 3 + 20 = (20.8 x 3 + 20) = 82.4
£160,000 / 82.4 = £1,941.75

Benefits payable

Special annual pension payable = £8,000 - £1,941.75 = £6.058.25
Special lump sum = £1,941.75 x 20.8 = £40,388.40

2015 benefits 

The commutation is a fixed rate of 12:1 which means that for every £1 of annual pension you give up you get £12 of lump sum. You can commute up to 25% of your pension to provide a lump sum.

The only pension that cannot be commuted is a Higher Tier Ill Health Pension.

Example – Commutation from 2015 Scheme

Retirement pension = £8,000

Commutation option = maximum 25%

Commuted pension = £8,000 x 25% = £2,000

Annual pension payable = £8,000 - £2,000 = £6,000

Lump sum = £2,000 x 12 = £24,000

Claim your pension

There are a few things that you can do to ensure that there are no delays with paying your pension.

You should inform your manager that you are retiring. It is preferable, but not essential that you give two months’ notice so that your employer and Hampshire Pension Services have enough time to prepare your retirement benefits.

Your manager will inform your employer's payroll provider and in turn they will prepare the necessary leaver form with your pay and service details and send to Pension Services.

You will need to complete the Retirement Declaration form and return to Hampshire Pension Services, together with any relevant certificates.

Hampshire Pension Services will process your retirement within 15 working days of receiving all the necessary paperwork from both you and your employer. They will send you written notification of your actual retirement benefits.