An early payment reduction applies to members who retire 'early' in normal health. Early means, for deferred 2015 scheme members, those who retire before reaching their State Pension Age (SPA).
Guidance for calculating the early payment reduction applied to members retiring early from deferred status is set out in Members retiring from deferred status (Deferred member accounts) below.
The deferred member's account must specify the early payment reductions applying to each amount of deferred pension and deferred added pension.
A deferred pension is payable without reduction for early payment from the higher of age 65 and the member's SPA.
The responsible authority has confirmed that SPA for the purpose of calculating early retirement factors should be as set out in Department of Finance Directions.
The early payment reduction applying to the amount of deferred pension can be calculated using the following formula:
Early Payment Reduction = Deferred pension x (1 - FB)
Where:
Deferred pension is taken from the relevant deferred account at the date of retirement and should include transferred in pension.
FB is the early payment reduction factor from Table B (Table 403 in the consolidated factor spreadsheet) in Factor Tables, chosen by reference to the period to a member's deferred pension age for earned pension. The period to deferred pension age should be rounded up to the next month. Alternatively, the period is equal to the member's deferred pension age (in years and months) less the age of the member in completed years and months.
For the avoidance of doubt, do not deduct any commutation amount from the amounts of deferred pension prior to carrying out the calculation above.
Pensions payable to a member's spouse, partner or dependant should not be reduced.
The member's annual rate of full retirement pension at retirement is then calculated by subtracting the early payment reductions from each amount of deferred pension specified in the deferred member's account (together with any reductions for commutation).
