When can I retire?
You can retire and receive your Local Government Pension Scheme (LGPS) benefits in full once you reach age 65. The scheme also provides for the early payment of your LGPS benefits; detailed in the sections on early retirement and ill health below.
- Can I retire early?
If you have at least three months total membership you can retire from office and receive payment of your benefits at any time from age 60 onwards.
If you are aged 50 to 59 you may be able to retire from office and receive payment of your benefits immediately but payment of benefits before age 60 is only possible with your Council's consent. This is a Council discretion and should be included in your Council's policy statement.
Will my pension and lump sum be reduced if I retire early?
If you joined the LGPS after 30 September 2006, retire and elect to receive benefits before age 65 your pension and lump sum will be reduced to take account of being paid for longer. How much your benefits are reduced by depends on how early you draw them.
The reduction is calculated under guidance issued by the Government Actuary. 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 to age 65. The earlier you retire, the greater the reduction.
As a guide, the percentage reductions for retirements up to five years early between and including the ages of 55 and 65 are shown in the table below. Where the number of years is not exact, the reduction percentages are adjusted accordingly.
Pension reduction % Lump sum reduction % Years early Male Female All members 1 5.6 5.2 2.9 2 10.8 10.1 5.7 3 15.5 14.6 8.5 4 20 18.8 11.2 5 24 22.7 13.7
If you were contributing to the scheme on 30 September 2006 some or all of your benefits paid early could be protected from the reduction if you are a protected member.
Your council can agree not to make any reduction on compassionate grounds. This is a council discretion; you can ask your council what their policy is.
If you voluntarily retire before age 65 you do not have to receive immediate payment of your benefits and can defer them within the LGPS for payment at a later date.
Points to note on early retirement
- If your council gives their consent to pay immediate early retirement benefits before age 55, this may result in a tax charge on your benefits. This would be in addition to the normal PAYE tax on your monthly pension. Payment of benefits on or after age 55 will not result in the additional tax charge
- If your council gives consent to immediate early retirement benefits on or after age 55 and before age 60 your pension will be increased each year in line with the appropriate cost of living index
- If they give consent to immediate early retirement benefits on or after age 50 and before age 55 your pension will be paid at a flat rate until age 55. At that time it will be increased by the accumulated effect of inflation since you retired
- Late retirement
What if I carry on working after age 65?
- If you carry on in office after age 65 you will continue to pay into the scheme, building up further benefits. You can receive your pension when you retire or when you reach the eve of your 75th birthday, whichever occurs first
- If you draw your pension after age 65 the pension you have built up to age 65 will be increased to reflect the fact that it will be paid for a shorter time
- Your pension has to be paid before your 75th birthday
- Ill health retirement
Before your employer can award you ill health benefits they need to satisfy themselves that your are permanently too ill to do your job (at least until age 65). In deciding this, they will consult a medical practitioner qualified in occupational health.
Ill health benefits are worked out just like ordinary pension benefits, but with two key differences:
There are no early retirement reductions and if you have at least five years' membership, your benefits will be based on the membership you have built up so far plus some extra years, as shown here:
Years' membership Ill health enhancement Less than 5 None Between 5 and 10 Membership doubled Between 10 and 13 1/3 Increased to 20 Over 13 1/3 Increased by 6 2/3
Your increased membership, however, must not exceed the total membership you would have accrued had you continued in service until age 65.