Rule of 85
Contents
Background to the 85 Year Rule
The 85-year rule was introduced into the scheme on 1 April 1998. It allowed members retiring before Normal Pension Age (NPA) to take unreduced benefits at retirement if the total of their age (minimum age 60) and calendar membership (both in complete years) equals 85 or more.
The 85-year rule was removed from the scheme for all new starters on or after 1 October 2006.
Those members who started before this date will have some protection from the removal of the 85 year rule and the level of protection will depend upon their age and membership.
This protection means that if the member takes their retirement benefits before their NPA, their protected benefits will be reduced to the later of the date they reach age 60 or their 85-year rule date.
Switching on the 85 Year Rule
You have the option to switch on the Rule of 85 Protections, so that the minimum of age 60 does not apply.
This will result in a cost payable by you on the member's retirement and you must have a published policy on this.
Flexible Retirement
For Flexible Retirement you do not have the option to switch off the 85 year rule as it is automatically applied and does so from age 55. Therefore, if a member holds 85-year rule protection (and is under age 60 at the point of flexible retirement) actuarial reductions may apply to the unprotected benefits where the employer chooses not to waive them. However, benefits that are protected will not be reduced if the rule is met and so a pension strain cost could still apply.
This means that if the member reaches their 85-year rule date at age 58, for example, and were granted Flexible Retirement at age 57, the benefits protected by the 85-year rule would only be subject to 1 year's reduction, rather than the 3-year reduction that would normally apply to age 60. In this case there would be a pension strain cost to the employer.
There may be a cost payable by you to allow a member to take Flexible Retirement under the age of 60. Generally, there is no cost to you if the member takes Flexible Retirement from age 60.