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You're flexibly retired

Understand your benefits and options as you take steps towards full retirement

Did you know?

  • You can take flex up to three times

    fully retiring on your final flex

  • You reduce working hours when you flex

    but the reduction doesn’t have to match the percentage of your pension you’re taking

  • You’ll continue to build your pension

    as you continue to work and earn a salary

You’re winding down to life in retirement

Switching from working life to full retirement and receiving a pension as your main income can be a big change but there are options as you adjust.

As a flexibly retired member of USS, you’re continuing to work and pay in to the Retirement Income Builder - the defined benefit (DB) part of USS. You’ll also continue to build up savings in the Investment Builder – the defined contribution (DC) part - if you’re earning over the salary threshold or have decided to make additional contributions.

At the same time, you’re receiving a proportion of the USS pension you’d already built up in the Retirement Income Builder.

It’s important to think about your next flex, and to understand how your benefits and savings change along the way.

As a flexibly retired member of USS, you’ll have already taken at least one flex.

This means you’ll have started taking between 20% and 80% of the pension you’d built up in the Retirement Income Builder. You may also have taken the same proportion of the tax-free (up to a limit) lump sum you would be entitled to at retirement.

At the same time, you’ll have reduced your working hours and salary so you’re working no more than 80% of your original hours, in agreement with your employer.

If you took 80% of your Retirement Income Builder pension and lump sum straight away, you’ll need to fully retire the next time you want to flex as a minimum of 20% is required to do this, and that is all that would remain.

 

You may have already taken a second flex, or you’re considering it as the next step on your journey towards fully retiring.

Here are your options and key steps at this stage:

  • If you took less than 80% of your benefits for your first flex, you can choose how much to take for your second flex as long as it’s at least 5%. You could take all that remains and you’ll fully retire from USS, or you can leave at least 20% of your pension for a third and final flex.
  • If you took the full 80% during your first flex, you’ll need to take the remaining 20% this time which would make this your final flex to full retirement.
  • When you flex, you’ll need to reduce your working hours and salary again by at least 20% of the amount you’re still working, in agreement with your employer.
  • The reduction to your working hours and salary will need to be made at the same time as your flex. However, the percentage you reduce your hours by does not need to match the percentage of benefits you take.
  • Before you flex, you must give two months’ prior written notice to USS.

If you have any pension and lump sum left to take after your second flex, you’ll take it as your third and final flex.

This means you’ll retire from USS and start to receive your full Retirement Income Builder pension, including everything you’ve built up in there minus the value of the benefits you’ve already taken as part of flex. It will also include anything you’ve continued to build up while working during your flexible retirement.

An example of a flexed pension

Here's what benefits could look like after a flex, and then when fully retired. Remember, your situation is unique. Flexible retirement enables you to make decisions about when and how you'd like to access your benefits, reduce working hours or fully retire.

  • Sam’s first flex at age 60

    Sam’s Retirement Income Builder pension, calculated to the date he flexibly retires, is £13,875. This means he has a full annual pension at age 60 of £13,875 and a one-off, tax-free (up to a limit) cash lump sum of up to three times this amount, at £41,625.

    Sam wants to flex and take 80% of this, which would amount to a pension of £11,100 and a cash lump sum of £33,300.

    As he is drawing some of his pension before the Normal Pension Age (NPA), early retirement reductions will be applied in line with USS rules. This means the total pension he’ll receive at age 60 on taking flexible retirement will be £9,129.30, with a £27,387.90 cash lump sum.

    At the same time, Sam has agreed with his employer to reduce his working hours and salary by 20%.

    He’ll continue to contribute to his Retirement Income Builder pot, based on the 80% of his original hours that he’ll continue to work.

    As he’s chosen to take the full 80% of benefits straight away in his first flex, Sam will fully retire on his next flex.

  • Sam flexes to full retirement at 66

    Since flexibly retiring at age 60, Sam has been working 80% of his previous hours. He also took 80% of the £13,875 pension he had built up to that date.

    When he fully retires at age 66 he’ll take the remaining 20% of this, which amounts to £2,775. This will not be subject to early retirement reductions because he’s not bringing it into payment before the NPA.

    Some benefits will also be increased due to Sam bringing them into payment later than age 65, and the amount will have grown each year between the ages of 60 and 66 in line with USS Standard Pension Increases.

    Sam’s pension package when he fully retires will be made up of:

    • The pension he started taking at age 60, plus increases to full retirement at 66: £10,900.86
    • The remaining, unflexed pension at 60 with increases applied until age 66: £3,452.30
    • The pension he built up from age 60 to 66 while he continued to pay in to USS: £4,125

    He could also take a one-off, tax-free (up to certain limits) cash lump sum of three times his unflexed pension and the pension built between 60 and 66, amounting to £22,731.91.

    This brings Sam’s total annual Retirement Income Builder pension to £18,478.16, with a one-off cash lump sum of £22,731.91.

How the Investment Builder works if you’re flexibly retired

The flexible retirement pension you receive comes from your Retirement Income Builder pot – the defined benefit (DB) part of USS - which provides you with a guaranteed income for life in retirement.

Just like when you retire fully, you have the option to take everything, nothing or just a bit from any savings you have in the Investment Builder – the defined contribution (DC) part of USS. It’s up to you.

Find out more about your options for using your Investment Builder pot.

While you’re still paying in to USS, you can continue to pay in to the Investment Builder and, if you wish, set up additional contributions. Log in to My USS to manage any Investment Builder savings.

Your benefits could help to support your loved ones

Although it’s not easy to think about, it’s important to be aware of what would happen to your benefits if you were to die during flexible retirement.

Find out more about what loved ones and beneficiaries could receive.

Continue to keep your Expression of Wish and Registration of potential dependant forms updated in My USS so we know who you’d like to receive any benefits and savings should the worst happen.

Make informed decisions for now and your future

Understanding how your ongoing path towards full retirement could affect your income now and in the future can help you make the right decisions for you.

As you continue to work and pay in to your USS pension, you continue to receive tax relief on the contributions you make. However, just like when you fully retire, you pay tax on the pension you receive. Find out more about Income tax in retirement.

For more support and details of how to access additional help with financial planning, visit our guidance and financial advice page.