Early payment reduction factors are used to reduce benefits of members who wish to retire before their normal pension age (NPA). NPA in the JPS 2022 is State Pension Age, subject to a minimum of age 65.
The age of the member at the effective date of the member's retirement claim (early retirement date) should be calculated in whole years and complete months, part months ignored, as appropriate. This age should then be used to identify the correct factor from the tables.
Where the member's NPA is not an integer, the reduction factor should be calculated by linear interpolation between the reduction factors that would have applied if NPA were the nearest integer age below actual NPA and the nearest integer age above the actual NPA.
Separate factors are provided for pension credit members, where the associated pension debit member was a pensioner at the time the pension credit was implemented. In this case, our understanding is the pension credit member does not have the option to commute from their pension credit at retirement, which is reflected in the factors in tables A9-A12.
Administrators should therefore determine the status of the associated pension debit member before calculating the early retirement pension for any pension credit members.
For the avoidance of doubt, pension credit cases where the associated pension debit member was an active or deferred at the time the pension credit was implemented should use the factors in tables A5-A8 as for scheme members without a pension credit. The factors in tables A5-A8 assume that the member does have the option to commute on retirement.
The pension following early retirement (ERP) is calculated as follows:
ERP = Pension x ERFNPA
In this calculation:
Pension is the pension at the early retirement date, which was eligible to be paid unreduced from the member's NPA, including the relevant in-service or deferred revaluation up to the early retirement date.
ERFNPA is the early payment reduction factor that applies for the member, calculated in accordance with the guidance above.
The early payment reduction for the member is equal to the member's pension before adjustment for early retirement less the ERP, where Pension and ERP are defined as above.
Early Payment Reduction = Pension - ERP
The Lord Chancellor has confirmed that State Pension Age for the purpose of calculating early payment of pension should be as set out in legislation in force at the time of retirement. Factors are provided to accommodate the range of pension ages members will have in relation to service on and after 1 April 2022 in accordance with current legislation.
This guidance should not be used to calculate the reductions to be applied to members aged below 55 at the date of payment. Such cases should be referred to MoJ, for onward transmission to GAD. Factors for age 54 are included in the table in order to calculate the reduction for a member with an NPA that is not a whole number of years who wishes to retire aged 55.
