Definition of Voluntary Retirement Scheme

Voluntary retirement schemes are programs offered by employers to provide retirement benefits to long-term employees before the employees' projected retirement dates. Businesses and organizations often offer voluntary retirement schemes as a method of workforce reduction and to reduce long-term costs.

Most VRS programs offer lucrative terms to employees that choose early retirement, such as a full benefits package and a lump sum payment. Retiring employees do need to consider the financial implications of accepting a VRS, however. They remain liable for taxes on lump sum payments and early retirement can also strain any existing retirement plans. Employees offered a VRS should examine their finances with care to determine if their existing retirement finances can support early retirement.