Financial Adviser | A tutorial on early retirement for state workers
Q: I have been employed to the Ministry of Education for 17 years and I am 55 years old. I want to apply for early retirement. Could you please supply me with some answers to these questions?...
FINANCIAL ADVISER: Early retirement is retiring or leaving employment before the statutory or official retirement age. For persons employed in the civil service, there are two types of early retirement: premature retirement, for persons between the ages of 50 and 54, and early retirement, for persons between the ages of 55 and 60.
Persons may choose premature retirement on the grounds of ill health or migration. In the former case, they would need to provide evidence of ill health in the form of a letter from a medical practitioner; in the latter, a visa is acceptable proof.
Persons opting to retire early ages 55 to 60 are not required to say why. They need to write a letter to the department or ministry at which they work to say they want to proceed on early retirement at a particular time.
The letter to the government department or ministry must be original and signed with a pen with blue or black ink, preferably blue; electronic signatures are not acceptable.
In addition to being at least 55 years old, applicants for early retirement should have worked in the service for a minimum of ten years. You qualify on both counts.
An application for early retirement must be processed by the relevant department or ministry which, in your case, is the Ministry of Education, the Offices of the Services Commission, and the Ministry of Finance.
A LATER DATE
It is prudent not to submit your letter too close to the time you want to proceed on retirement as the particular department or ministry the Ministry of Education in your case may not be able to approve the retirement date you chose. Although the application is hardly likely to be rejected, the department or ministry may request a later date to allow for time to identify a suitable replacement for you to allow its work to continue seamlessly.
One particularly important function carried out by the Ministry of Finance is doing an audit to ensure the correctness of your leave calculations over the full length of your service, for instance.
There are two stages of the process that may each take six to eight weeks to complete, so the time between the application and when pension payments begin may take as long as four months. If you have enough leave, you will reduce the risk of being out of pocket. If you don't, that is a consideration that should not be far from your mind.
Your pension will take the form of a monthly payment, but there will be an initial lump-sum payment, or gratuity. This sum is not in addition to your pension. It is a portion of your pension that is paid up front to you. This effectively makes your monthly pension less than you would receive if such a sum was not paid to you. This, by the way, also applies to persons who retire at the normal retirement age.
When you retire early, you elect to receive a lower pension in that the years over which the pension is calculated is less than what would apply up to the normal retirement age. Additionally, the pensionable pay on which the pension is calculated basic pay, seniority allowance, housing allowance, for example is almost certainly going to be less than what would obtain at the normal retirement age.
The above does not have to work against you. You could use the opportunity to start a business or to gain employment elsewhere thereby increasing your disposable income. At 55, you potentially have many years ahead.
- Oran A. Hall, principal author of 'The Handbook of Personal Financial Planning', offers personal financial planning advice and counsel.