Early Retirement Reductions
Taking Your Pension Early
Most people would prefer to retire sooner rather than later. However, if you choose to take your pension before your Normal Pension Age, it will likely be reduced. The only exception to this is ill health retirement and members who qualify for full Rule of 85 protection.
Why is my pension reduced if I take it early?
As you are choosing to take your pension earlier than expected, your pension needs to stretch and be paid over a longer period of time. To ensure it can be paid over the entirety of your retirement, the amount you are paid each year is reduced to cover the additional years.
In simple terms, if you had £10,000 to be paid out over 2 years, you'd get £5,000 per year. But if the same amount is to be paid over 5 years, you'd get £2,000 a year.
How much will my pension be reduced by?
The reduction is based on how many years earlier than your Normal Pension Age (NPA) you retire. If you retire part way through the year, for example 3.5 years before your NPA, the percentages are adjusted accordingly. These reduction rates are set by the Government and are reviewed regularly. You can see the current rates below.
| No. of Years Paid Early | Annual Pension Reduction | Lump Sum Reduction |
| 0 | 0% | 0% |
| 1 | 5.0% | 1.7% |
| 2 | 9.7% | 3.3% |
| 3 | 14.0% | 4.9% |
| 4 | 18.0% | 6.5% |
| 5 | 21.6% | 8.1% |
| 6 | 25.0% | 9.6% |
| 7 | 28.2% | 11.1% |
| 8 | 31.2% | 12.6% |
| 9 | 34.0% | 14.1% |
| 10 | 36.6% | 15.5% |
| 11 | 40.6% | N/A |
| 12 | 42.9% | N/A |
| 13 | 45.1% | N/A |
So how much will my pension be?
You can find out exactly how much your pension would be if you were to take it early by logging into My Pension+. Use the Deferred Payment calculator and see how taking your pension at different dates changes it's value.
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