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 2016 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

    LGPS Flexible retirement options

    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.

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

    Normal retirement age:

    Age 60 for those who joined before January 2007

    Age 65 for those who joined from January 2007 onwards

    Members have the right to retire from age 55. Benefits will be actuarially reduced if taken before normal retirement age.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.

    TPS Flexible/phased retirement options

    From age 55

    • Salary must reduce by at least 25% for at least 12 months

    • Benefits reduced if retirement before normal retirement age

    • Staff choose to take up to 75% of pension at phased retirement date

    • Members can take phased retirement twice before final retirement

    • Pension will not be subject to abatement if employee is re-employed, i.e. no restriction on earnings.

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

    Staff who were USS members at their previous institution at the time they joined Brookes are currently able to continue in membership of USS.

    Normal retirement age is 65

    Age 55 – 59 members can only retire with employer permission as their is a cost to the Employer.

    Age 60 – 65 members can retire without permission.

    • With consent, member can sometimes receive unreduced pension
    • Consent will not be “unreasonably withheld”
    • Individual estimates can be arranged via HR.

    USS - no provision for flexible retirement