When can I retire?
When you leave your job, benefits are paid in the following circumstances:
at age 65.
on retiring aged 60 to 65, but your benefits may be reduced.
on retiring aged 65 to 75, but if you draw your pension after age 65 it may be paid at an increased rate.
on taking early retirement because of permanent ill health and are unlikely to be capable of gainful employment within a reasonable time after you leave.
on taking early retirement at 55 or older on the grounds of redundancy or efficiency measures.
on taking early retirement with the agreement of your employer when aged 55 to 60, but your benefits may be reduced.
on taking Flexible Retirement with the agreement of your employer at age 55 or over.
Voluntary retirement between the age 60 and 65 - reductions and the '85 year rule'
The normal retirement age for taking unreduced benefits in the Local Government Pension Scheme is 65. If you choose to retire before then, your pension benefits may be reduced.
Any reductions depend on when you joined the scheme, how old you are and how much membership you have.
| Years paid early | Pension reduction percentage
males | Percentage reduction precentage
females | Lump sum reduction percentage
all members |
|---|---|---|---|
| 1 | 6 | 5 | 3 |
| 2 | 11 | 11 | 6 |
| 3 | 16 | 15 | 8 |
| 4 | 20 | 20 | 11 |
| 5 | 25 | 24 | 14 |
If you joined the LGPS on or after 1 October 2006 your benefits will be reduced if you retire before age 65.
Example: George joined the scheme in December 2006. If he decides to retire at 60 (because he is choosing to take his benefits five years before age 65) both his pension and lump sum will be reduced as follows:
Pension reduction: 25 per cent
Lump sum reduction: 14 per cent
If you joined before 1 October 2006 a test is carried out on retirement to see when you meet the '85 year rule'.
Your age and length of membership (both in whole years) are added together and depending on when these two elements total 85 and when you were born determines whether your benefits may be reduced.
Working out how you are affected by the 85 year rule can be quite complex, but this should help you work out your general position:
If you don't satisfy the 85 year rule by the time you are 65, then all your benefits are reduced if you choose to retire before 65. The reduction will be based on how many years before 65 you draw your benefits.
If you are aged 60 or over by 31 March 2016 and choose to retire before age 65, then. provided you satisfy the 85 year rule when you start to draw your pension, the benefits you build up to 31 March 2016 will not be reduced.
If you will be under age 60 by 31 March 2016 and choose to retire before age 65, then. provide you satisfy the 85 year rule when you start to draw your pension, the benefits you build up to 31 March 2008 will not be reduced.
Also if you will be aged 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 you build up between 1 April 2008 and 31 March 2020 will not have a full reduction.
Born before 1 April 1956, retiring before 1 April 2016 and meet the 85 year rule?
No reductions will be made to your benefits.
Example: Sue was born in 1952 and joined the scheme at 18. If she decides to retire at age 60 in 2012 she will have 42 years membership so will meet the 85 year rule.
There will be no reductions to Sue's benefits.
Born before 1 April 1956, retiring before 1 April 2016 and do not meet the 85 year rule when you retire but do so before age 65?
Your benefits will be reduced based on the period between date of leaving and the date the 85 year rule is met.
Example: Adrian was born in 1 April 1949 and joined the scheme in 1989. If he decides to retire at age 60 he will have 20 years membership. At age 60 he will not have met the 85 year rule, however, he will meet the 85 year rule at age 63. Adrian's benefits will have a 3 year reduction (based on the period between date of leaving and the date the 85 year rule is achieved) as follows:
Pension reduction: 16 per cent
Lump sum reduction: 8 per cent
Born between 1 April 1956 and 31 March 1960, retiring before 1 April 2020 and meet the 85 year rule?
Your benefits to 31 March 2008 will not be reduced. The benefits based on membership after 1 April 2008 won't have a full reduction − the reduction will be 'tapered' (the Governments decision on extending full 85 year protections after 1 April 2008 for this group is still outstanding).
Born after 1 April 1960 and meet the 85 year rule when you retire?
Your benefits up to 31 March 2008 will not be reduced. The benefits based on membership after 1 April 2008 will be reduced if you take them before age 65. The reduction is based on the period between the date of leaving and age 65.
Example: Rachel was born 1 April 1970 and joined the scheme at age 18. If she retires at age 60 she will have 42 years membership so will meet the 85 year rule. The benefits based on 20 years membership before 1 April 2008 will be unreduced, but the benefits based on the 22 years membership after 1 April 2008 will have a 5 years reduction (because she is choosing to take her benefits 5 years before age 65) as follows:
Pension reduction: 24 per cent
Lump sum reduction: 14 per cent
Want to know more?
Look on the other sections on this website, or you can get a copy of the Derbyshire Pension Fund employee's guide by phoning Call Derbyshire on 08 456 058 058.