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Early Retirement

By: Paul Geraghty - Updated: 30 Nov 2020 | 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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I am 63 years of age being made Redundant this month after 31 Years with my current Airline employer. I want to keep my Staff travel concessions etc but this is normally only given if you take early retirement. So I don't know what to do. Regards, Mark
Hammy - 30-Nov-20 @ 7:02 PM
My job is being made redundant in December, I had already given notice of my intention to take early retirement in January, after my job is made redundant, prior to the announcement.Am I entitled to redundancy?
Cambstiger - 6-Oct-20 @ 3:19 AM
I’m 65years I have COPD also heart disease I’m on the sick at the moment due to the corvina virus can I ask to be payed off Thanks Angela
Ang Wilko ?? - 14-Aug-20 @ 12:17 PM
I was made redundant after 30 years working for SBC I am 62 with health problems and think this was my downfall I really think govement needs to look at firms getting rid of being penalised for being born in the 50s
Suse - 2-Aug-20 @ 11:28 AM
Hi ive put in for my severance pay and also early retiment im 62 this year will it affect my state pension when im 66 x
Poddle - 18-Jul-20 @ 7:19 PM
I have put in for redundancy after staff restructuring. Headteacher as come back and said because I’m 57 we are offering you early retirement . No figures as yet , but doesthis have an impact on the amount of money I will receive when I actually retire . Is the pension money a drip feed of amount each month or lump some . Can I refuse taking my pension and leave it for a later date. Because I’m 57 can I now not go back to the headteacher and say I want redundancy. I’m confused . Is taking early retirement better for the school. Do I have reduced pension because I’m taking it early . Thank you
Smiles - 21-Nov-19 @ 4:11 PM
Redundancy has been announced for 2021, but I feel my employer may ask for me to be medically retired. What is difference?
Mel - 22-Jul-19 @ 10:28 PM
I am retiring in August and my post is not being replaced.Am I entitled to redundancy
Jaykay - 29-Jan-19 @ 12:57 PM
Jako - Your Question:
I have a retail butchers business and I want to retire I am going to close my business what happens about redundancy then, is it paid at the same rate or not at all. Can you give me any information on the subject

Our Response:
The Acas link here , should help answer your question.
RedundancyExpert - 18-Jun-18 @ 11:26 AM
I have a retail butchers business and I want to retire I am going to close my business what happens about redundancy then, is it paid at the same rate or not at all. Can you give me any information on the subject
Jako - 16-Jun-18 @ 5:28 PM
I took my pension pot at 55 and collect £600 per month from my private pension pot - I still work for the same company - looking highly likely that the arm I work in will close I’m 63 now - will I be entitled to a redundancy payment?
Marty - 2-May-18 @ 7:53 AM
I need help with redundancy linked to retirement.
Bongani - 10-Apr-18 @ 5:28 PM
i need some help please i have cancer & my life expectancy is not good news. I have been told i have between 6-18 months left to live. i have worked for my company for 25 years i was offered a redundancy package from the company & was told i could also take my pension to based on ill health (great wife & family could enjoy the time left in good comfort) then i was told i can not have both, it is either 1 or the other. questions i have i i took the redundancy package then 3 months later my doctor wrote to the company pension stating i have x amount of time to live, can i take my pension lump sum tax free (ill health less than a year to live)
Andy - 13-Mar-18 @ 4:52 PM
My organisation is being restructured and my salary halved in the process.I am 56 and have worked in the same organisation for 27 years.Please could you advise if I triggered early pension what the implications would be?Oris it advisable to go for a redundancy package?If I offer to go earlier that the restructuring comes into play should I negotiate for a better redundancy package
KPW - 4-Mar-18 @ 2:21 PM
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
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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