Early retirement impacts on pensions

  • Pension schemes offer different early retirement and flexible or phased retirement options.

    Flexible/phased retirement allows members to draw some or all of their pension benefits, carry on working in reduced capacity and carry on building up pension benefits.

  • LGPS retirement options

    The LGPS changed from final salary to career average on 1 April 2014. From 1 April 2014, the benefits you build up in the LGPS are payable in full from your Normal Pension Age (NPA).

    NPA in the LGPS is linked to your state pension age, however, you can choose to retire and draw your pension at any time from age 55 to 75. Protection is in place if you built up benefits in the final salary scheme before April 2014 which means that NPA for pre April 2014 benefits is protected and remains for the majority of members, age 65.

    Some or all of your pension will normally be reduced if you choose to retire before your NPA and increased if you retire later. The earlier you retire, the greater the reduction to your pension will be.

    Number of years early

    Pension reduction
    Men

    Pension reduction
    Women

    Lump Sum
    (for membership up to 31/03/2008)
    1 5.6% 5.2% 2.9%
    2 10.8% 10.1% 5.7%
    3 15.5% 14.6% 8.5%
    4 20% 18.8% 11.2%
    5 24% 22.7% 13.7%
    6 27.8% 26.4% 16.3%
    7 31.4% 29.8% 18.7%
    8 34.7% 33% 21.1%
    9 37.7% 36.1% 23.4%
    10 40.6% 38.9% 25.6%
    11 44.2% 42.2% N/A
    12 47.6% 45.5% N/A
    13 50.9% 48.6% N/A

     

    Note: If you were a member of the LGPS between 1 April 1998 and 30 September 2006, were age 60 or over on 31 March 2016 and satisfy the 85 year rule (your age and calendar length membership equals 85 or more) you may be entitled to further transitional protection.

    Age 60 or over on 31 March 2016 and retire before NPA If you satisfy the 85 year rule before you retire, benefits accrued up to 31 March 2016 will not be reduced
    Under age 60 on 31 March 2016 and retire before NPA If you satisfy the 85 year rule when you retire, benefits accrued up to 31 March 2008 will not be reduced
    Age 60 between 1 April 2016 and 31 March 2020 and meet the 85 year rule by 31 March 2020 Some or all of the benefits accrued between 1 April 2008 and 31 March 2020, will not be reduced

    From age 55 you can ask for flexible retirement. You must reduce your working hours by at least 20% or be paid a lower grade to be eligible. If your flexible retirement is agreed, you will have to decide how you wish to draw your pension. You must draw all benefits accrued before 1 April 2008, added years if your contract commenced prior to 1 October 2006 and additional voluntary contributions (AVC’s) that commenced before 13 November 2001. You can choose whether or not to draw:

    • All, none or some of benefits accrued from 1 April 2008 to 31 March 2014
    • All, none or some of benefits accrued after 1 April 2014
    • All, none, or some of benefits purchased either through additional pension contributions (APC’s), additional regular contributions (ARC’s) or AVC’s

    If you are retiring under flexible retirement, before normal pension age, the reductions above still apply.

    Flexible retirement options for members of the Local Government Pension Scheme (LGPS)

    Normal pension age (NPA) in the TPS is linked to your state pension age, however, you can choose to retire and draw your pension at any time from age 55 to 75.

    Protections are in place if you have benefits in the final salary scheme, this means that NPA for pre April 2015 benefits is protected and remains for the majority, 60 or 65. All career average benefits accrued from 1 April 2015 onwards are payable unreduced from your state pension age or 65 if later.

    Further protections are in place for members who were close to retirement age on 1 April 2012 depending on what type of member you are:

    Protected member

    An active member on 1 April 2012 and within 10 years of normal pension age

    Age 60 for those who joined before January 2007


    Age 65 for those you joined from January 2007

    Taper-protected member

    An active member on 1 April 2012 and between 10 and 13.5 years away from normal pension age

    Age 60 or 65 (as above) for final salary benefits


    State pension age for career average benefits

    Transition member

    An active member on 31 March 2015 and transitioned to the career average scheme on 1 April 2015

    Age 60 or 65 (as above) for final salary benefits


    State pension age for career average benefits

    Career average only member

    Joined the scheme on or after 1 April 2015

    		 State pension age


    If you choose to retire before your NPA, some or all of your benefits will be actuarially reduced. This means that your pension will be smaller because you will be drawing it for longer. The earlier you retire, the greater the reduction will be. You can calculate what the value of your reduced pension might be on the TPS website.

    From age 55 you can ask for phased retirement. Phased retirement allows members to continue working part time or full time with reduced responsibilities and withdraw up to 75% of their pension at the same time. The reduction in salary must be at least 20% in comparison with the previous six months averaged earnings and apply for at least 1 calendar year. If the phased retirement application is made before NPA, the pension paid will be reduced.

    Protected and taper-protected members that have not transitioned into the career average scheme can take 2 phased retirements. Career average scheme members can take 3 phased retirements - but only 2 before age 60.

    Phased retirement options for members of the Teachers’ Pension Scheme (TPS)

    If you were a member of the USS before joining Brookes and have less than 30 days break in between, you can continue membership in this pension scheme.

    Normal pension age (NPA) in the USS is linked to your state pension age, however, you can choose to retire and draw your pension at any time from age 55 to 75.

    If you choose to retire before your NPA, the benefits you have built up in the retirement income builder will be reduced by approximately 4% for each year before NPA.

    The earlier you retire, the greater the reduction will be. You can calculate what the value of your reduced pension might be on the USS website.

    From age 55 you can ask for flexible retirement. Flexible retirement allows you to take up to 80% of your retirement income builder savings if you reduce your salary by at least 20% - this can be achieved by working part time. The reduction must apply for at least 1 year. If you apply for flexible retirement before NPA, your pension will be reduced accordingly.

    You can flexibly retire twice whilst continuing to work and must draw between 20% and 80% of your benefits - if you take 80% on the first flexible retirement you would have to retire fully to draw further benefits.

    Flexible retirement options for members of the USS