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Early Retirement

By: Paul Geraghty - Updated: 7 Dec 2017 | comments*Discuss
 
Early Retirement

Early retirement is one of the most commonly-offered alternatives to redundancy. Whether it is the best option for you in the circumstances is something that has to be considered very carefully.

It is important for you to understand that you cannot be forced into early retirement; and if you are being subjected to pressure, you should resist that pressure if you are not convinced it is the best option for you.

How Early Retirement Affects Your Redundancy Rights

Not everyone is clear about whether or how early retirement intertwines with your redundancy rights. The answer is clear : early retirement is not a form of redundancy; it is an alternative to redundancy. So, if you choose the early retirement option, you will have no redundancy rights. You will not receive a redundancy payment.

Why would you do it then? Good question. Typically, an employer will offer incentives along with the early retirement option, such as a large lump-sum payment.

The earliest age at which you can access your state pension is 60 if you are a woman and 65 if you are a man (for people born before 1950). Within the next decade or two, this is due to rise to 65 for both men and women, and then to 68 for both in the decades following. Private and occupational schemes operate by their own rules to a greater extent. Currently, the soonest you can access a private or occupational pension is at the age of 50. By 2010, this is due to rise to 55.

Deciding Whether Early Retirement Makes Economic Sense

It is very important to think through the financial implications of a decision to retire early. These are not always readily apparent, and this is a subject on which expert advice is highly recommended. In general, you need to bear the simple arithmetic of the situation in mind : if you retire early, your pension pot will be smaller than it would otherwise have been if you have waited until the normal retirement age; and, you will have to live on it for longer than if you had waited until the normal retirement age. Ignoring other factors, then, your annual pension income will be significantly lower.

A good rule of thumb is said to be that your pension income will ultimately be reduced by 9% for every year of early retirement. Inducements from your employer can bring this down a bit.

It is very important that you consider the financial implications of early retirement carefully before accepting it as an alternative to redundancy. Other people have unwisely opted for it and spent their twilight years living in poverty.

Working after Early Retirement

Not everyone is clear about whether they are allowed to work after they have retired early. The answer is yes. You are free to take on other employment, start your own business or do whatever you like and your pension entitlement is not affected in any way. In fact, if you choose to defer your pension because you are still earning an income, it can go on accumulating, meaning that, when you eventually claim it, you will get more than you would have otherwise.

Early Retirement – Conclusion

Early retirement can seem a tempting option, particularly when your employer offers incentives. But you need to think it through carefully to see whether you will really benefit in the long run.

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Babbeen - Your Question:
I retired at 55 ( nhs have worked there for 32 years )and after a months break returned part time on 3 days ! I have worked now for a further 2 years. Am I entitled to redundancy

Our Response:
You should be entitled to some redundancy if you have had have at least two years’ continuous service. You can use the redundancy pay calculator to work out payments via the link here . However, you will only be entitled to the two years service for redundancy, not 32, as your contract would have changed after retirement.
RedundancyExpert - 8-Dec-17 @ 10:15 AM
I retired at 55 ( nhs have worked there for 32 years )and after a months break returned part time on 3 days ! I have worked now for a further 2 years . Am I entitled to redundancy
Babbeen - 7-Dec-17 @ 8:35 AM
Hi Thank you for your advice this morning but can I now kindly ask forit to be deleted as it was wrongly input it ment to be private and confidential only and not to be share Thank you for your time
Monica - 4-May-17 @ 2:52 PM
Dicky - Your Question:
I was made redundant in 2007, on civil service conditions. I chose to receive an immediate lump sum, and monthly payments until aged 60, and then reduced payment until retirement age, then at 65 years. With the retirement age now removed will be eligible to continue to receive payments after reaching 65. Many thanks for any advice.

Our Response:
In this case you may wish to contact the Pension Advisory Service, please see link here.
RedundancyExpert - 4-May-17 @ 10:46 AM
Hi I am 60 years old and I am being made redundant after 42 years service with the same employer.I wasnt even allowed to go back to my desk and collect my things nor to discuss it with anyone, can my employer stipulate that I am retire.My manager sent an email to everyone in the company stating that she wish me well in my retirement is this right?all the people that I have worked with didnt know nothing about it and they are very upset saying how can I retire so suddenly so I am very dissapointed Monica
Monica - 4-May-17 @ 10:40 AM
I was made redundant in 2007, on civil service conditions. I chose to receive an immediate lump sum, and monthly payments until aged 60, and then reduced payment until retirement age, then at 65 years. With the retirement age now removed will be eligible to continue to receive payments after reaching 65. Many thanks for any advice.
Dicky - 3-May-17 @ 11:41 AM
Hi, I am being made redundant after a 32 year career. I am 48 years old. If at 55 years old I seek early retirement , can my current employer stipulate that I can only work 50% of my current hours or 50% pay if I then seek employment and claim my company pension? Many thanks
Jonno - 9-Apr-17 @ 1:41 PM
Husband retires in august 2015. Company asked for voluntary redundancy, he was told he was eligible until after they had signed his offer letter, now they have withdrawn it. withdrawn because his notice was in. He retires after redundancy date. Can they do that after inviting him to apply even though the retirement date was known.
mat - 14-Jul-15 @ 3:28 PM
@Gin - According to Acas, employers cannot force employees to retire or set a retirement age unless it can be objectively justified. Please see link here. If you need any further clarification, please give them a call. I hope this helps.
RedundancyExpert - 8-Apr-15 @ 11:46 AM
I'd like to enquire about my Mum who is being asked by her employer to take early retirement. My mums birthday is 22.11.1948 which makes her 6. towards the end if the year.I have advised her that she cannot be forced to leave before her birthday. Could you advise me of her rights. She seems to think that women born before 1950 have to retire early than the current age. Many thanks Ginette
Gin - 5-Apr-15 @ 8:41 AM
@Wally - sorry to hear this Wally. I would recommend you speak to your company directly. Surely, given the circumstances they will give you the best advice on what they can offer and what they think would be the best way forward. I guess they will want to address the issue as much as you. For you personally perhaps it is time to actually sit back and take some 'you' time. I hope they come up with a good deal and that your treatment is successful so that you can fully enjoy your life.
Jan - 19-Feb-15 @ 2:22 PM
I have just turned 59 and have recently been diagnosed with prostate cancer. I have had surgery to remove my prostate and there is still some cancer left, so I am now on hormone therapy and will undergo 6 weeks of radiotherapy in March this year. If this is unsuccessful it could mean Chemotherapy in the future, or the worst-case scenario is that it will be terminal. I have worked for my current employer since August 2008 (6 years & 6 months) and am considering asking my line manager to propose to the Directors that I retire early on medical grounds as I will be off work for the Radiotherapy, possible Chemotherapy and other times that I could be ill and also to give them the opportunity to train a replacement before I leave. It will allow them to get someone into my job before my boss retires next year, i.e. continuity in the department. I would like 1 x year's salary as an incentive payment as this would enable me to pay off my mortgage and I could then live reasonably with my military pension payments until I get my state pension at age 66. Is 1 x year's salary acceptable (or the "norm") in such circumstances where it is not only good for me to go early as my health and possible time off work are unknown factors, but also good for the company as they will get a new replacement trained up and in good time for continuity when my boss retires. Your comments would be appreciated.
Wally - 18-Feb-15 @ 9:30 AM
approaching 65 in october can I take redundancy if offered prior to this then retire from a local gov pention any time after october as I could work for several more years if I wanted? + of course my state pention kicks in on my 65
john - 20-Jan-15 @ 8:48 AM
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