Will my pension be reduced if I voluntarily retire before my Normal Pension Age?

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If you choose to retire before your Normal Pension Age your benefits will normally be reduced to take account of being paid for longer.

Your benefits are initially calculated as you will see in the section How is my pension worked out? and are then reduced. How much your benefits are reduced by depends on how early you draw them.

The reduction is calculated in accordance with guidance issued by the Government from time to time. The reduction is based on the length of time (in years and days) that you retire early – i.e. the period between the date your benefits are paid and your Normal Pension Age.  The earlier you retire, the greater the reduction.

The table below shows the reduction that would be applied depending on the number of years before your Normal Pension Age you decide to draw your pension. Where the number of years is not exact, the reduction percentages are adjusted accordingly.

 
Years Early
Pension
Lump Sum
(for membership up to 31 March 2008)
1
5.1%
2.3%
2
9.9%
4.6%
3
14.3%
6.9%
4
18.4%
9.1%
5
22.2%
11.2%
6
25.7%
13.3%
7
29.0%
15.3%
8
32.1%
17.3%
9
35.0%
19.2%
10
37.7%
21.1%
11
41.6%
21.1%*
12
44.0%
21.1%*
13
46.3%
21.1%*

Your employer can agree not to make any reduction. This is a discretion and you can ask them what their policy on this is.

You can reduce or avoid the reductions by not taking immediate payment of your benefits on retirement i.e. by delaying payment until a later date.

If you decide not to draw immediate benefits, the benefits would normally become payable at your Normal Pension Age, but you can defer payment beyond that age, although benefits must be paid by age 75.

*The maximum reduction applied to your automatic lump sum for membership to 31 March 2008 is 10 years as the protected normal pension age is 65 and the earliest you can retire is age 55. There is no automatic lump sum for membership after 31 March 2008 although you can convert some of your annual pension to a lump sum.

If you were a member of the LGPS on 30 September 2006, some or all of your benefits paid early could be protected from the reduction if you are a rule of 85 protected member.

You can find out more about rule of 85 protections from the section I joined the LGPS before 1 April 2014.