Early retirement
Your LGPS pension is payable at your Normal Pension Age, but you can choose to receive it earlier or later. If you take it earlier, it will be reduced as it will be in payment longer. If you take it later it will be increased.
When you can take your pension
Currently, the earliest you can voluntarily release your LGPS pension is age 55.
The government is planning to increase this to age 57 from 5 April 2028. However, if you were paying into your LGPS pension before 4 November 2021, it is likely you will still be able to take your pension from age 55 if you choose to.
This does not apply in the case of an ill-health retirement. If you are retired due to ill-health, you can have your pension paid to you at any age without reductions.
Early retirement reductions
LGPS pensions are payable for life. Early retirement reductions apply when a pension is released earlier than Normal Pension Age to spread out pension payments, as your pension will be paid to you longer than expected.
The amount your pension will be reduced by will depend on:
- the date you joined the scheme
- the date you want to take your pension
- how close you are to your Normal Pension Age
The reduction will always be applied to your pension as long as it is in payment.
Early retirement reductions do not apply if:
- you are retiring at any age due to ill-health
- you are over age 55 (rising to 57 in 2028) and are made redundant or retired due to business efficiency
- your employer provides consent to waive reductions
Employer discretions to waive reductions
You can ask your employer if they would consider waiving early retirement reductions or allowing the 85 year rule to be switched on before age 60, which may result in reduced early retirement reductions.
Consent for either of these is given at the employer’s sole discretion and you should apply directly to them. There will usually be additional costs to the employer if they agree. All employers should hold a discretionary policy on LGPS discretions, to begin with, you may wish to request this from them.
How much are the reductions?
The reduction table sets out the permanent percentage deduction that would apply to your pension. The reduction table is set by the government and can change from time to time.
Please note: Early retirement reduction factors were revised from 3 July 2023. If your pension was paid early before this date, the reductions will be different.
| Number of Years Paid Early | Annual Pension reduction | Lump Sum reduction (for pre 1 April 2008 membership) |
|---|---|---|
| 0 | 0% | 0% |
| 1 | 4.9% | 1.7% |
| 2 | 9.3% | 3.3% |
| 3 | 13.5% | 4.9% |
| 4 | 17.4% | 6.5% |
| 5 | 20.9% | 8.1% |
| 6 | 24.3% | 9.6% |
| 7 | 27.4% | 11.1% |
| 8 | 30.3% | 12.6% |
| 9 | 33.0% | 14.1% |
| 10 | 35.6% | 15.5% |
| 11 | 39.5% | N/A |
| 12 | 41.8% | N/A |
| 13 | 43.9% | N/A |
The closer you are to your Normal Pension Age, the lower the percentage reduction. If you take your pension between two whole years, the percentage reduction will be proportioned to the number of days between the two percentages.
For example, if you take your pension 1 year and 20 days early, the reduction applied will be worked out as:
9.3% - 4.9%= 4.4 / 365 (number of days in a year) x 20 (days early) = 0.24109
+ 4.9% (number of whole years early) = 5.14109%
If you were to take your pension 1 year and 220 days early, the reduction applied would be worked out as:
9.3% - 4.9% = 4.4% / 365 (number of days in a year) x 220 (days early) = 2.65205 + 4.9% (number of whole years early) = 7.55205%
Protected Normal Pension Age for pension built up before 1 April 2014
The Normal Pension Age in the LGPS has changed over the years. For pension built up after 1 April 2014, it is the same as State Pension Age. Before that, the Normal Pension Age was 65 or earlier where certain protections, such as the 85 year rule, would apply.
These earlier pension benefits cannot be released separately to your later pension benefits, but they will always have the earlier protected Normal Pension Age. This means that different early retirement reductions may apply to different parts of your pension.
For example, if you are taking your pension at age 63, and you have a Normal Pension Age of 67, your pension is being paid 4 years early, so according to the table, an 17.4% reduction would apply to your pension built up after 1 April 2014.
However, if you have a protected Normal Pension Age of 65, the reduction for your pre-1 April 2014 pension benefits will be 9.3% as they are being paid 2 years earlier.
Getting an estimate
Early retirement reductions can be quite difficult to work out. If you want to know how much your pension would be reduced by, we recommend you obtain an estimate. To get an estimate of the pension payable to you, use My Pension Online.
If you are close to retirement, we recommend you contact us directly for an estimate before you make a decision about taking your pension. We can supply you with up to 2 estimates in any rolling 12 month period.