Planning Your Retirement The Local Government Pension Scheme

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• If you choose to retire before age 65 and do not satisfy the 85-year rule when you draw your benefits,your benefits are reduced.The reduction is based on the length of time (in years and days) that you retire early – from the dateyour benefits are paid to age 65 or to the date you would have satisfied the 85-year rule if earlier 2 .Example:A woman retires at 60 on 31 March 2007 with 12 years LGPS membership.As she does not satisfy the 85-year rule on retirement (60 + 12 = 72) her benefits are reduced. As she wouldnot have satisfied the 85-year rule by age 65, the reduction is based on her receiving her benefits 5 yearsearly, so her pension and lump sum will be reduced as follows:Pension reduction: 23%Lump sum reduction: 12%• If you choose to retire before age 65, and you satisfy the 85-year rule when you draw your benefits,then:If you were born before 1 April 1956 the benefits you build up to 31 March 2016 will not be reduced 3 .If you were born on or after 1 April 1956 the benefits you build up to 31 March 2008 will not bereduced 3 .Example:A woman retires at age 61 on 31 December 2007 with 24 years continuous membership in the LGPS. Shewas born before 1 April 1956 and all her membership is before 31 March 2016.She satisfies the 85-year rule on retirement (61 + 24 = 85), so her benefits are not reduced for earlypayment.Let’s assume she retired a year earlier, aged 60 with 23 years membership.In that case, she would not have satisfied the 85-year rule on retirement (60 + 23 = 83), so her benefits arereduced.She would have satisfied the 85-year rule by age 61, so the reduction is based on her choosing to receiveher benefits 1 year early and her pension and lump sum would be reduced as follows:Pension reduction: 5%Lump sum reduction: 2%2 An earlier 85-year rule date is only used in calculating the reduction:- if you were born before 1 April 1956, for benefits built up to 1 April 2016- if you were born on or after 1 April 1956, for benefits built up to 1 April 2008 (with a tapered reduction ifyou were born between 1 April 1956 and 31 March 1960 and meet the 85-year rule by 31 March 2020).3 Benefits built up after then will be reduced to take account of the fact that they are being drawn before age 65.14
You can reduce or avoid the reductions by delaying payment until a later date. If you are a woman aged 60 ormore and you choose to delay payment of your benefits so they are not reduced, we have to pay you the GMPelement of your pension from your retirement date.Here is the early retirement reduction table if you want to work out how much your reduction would be. Wherethe number of years is not exact, we adjust the reduction percentages accordingly.No. of yearspaid earlyPension reductionmenPension reductionwomenLump sumreduction0 0% 0% 0%1 6% 5% 2%2 11% 10% 5%3 16% 15% 7%4 20% 19% 9%5 24% 23% 12%6 28% 27% 14%7 32% 30% 16%8 35% 33% 18%9 38% 36% 20%10 41% 39% 22%11 44% 42% 24%12 47% 45% 26%13 50% 47% 27%14 52% 49% 29%15 54% 51% 31%The reduction is based on the length of time (in years and days) that you retire early - from the date yourbenefits are paid to age 65 or the date you would have satisfied the 85-year rule.As we describe earlier, if you are paying into the LGPS on 30 September 2006, some or all of your benefits paidearly may not be reduced by as much.15
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