For the purposes of setting the ERRBO contributions, Reduced retirement age (RRA) means the age from which retirement benefits earned during the period ERRBO contributions are paid are expected to be available with no actuarial reduction for early payment. For all members, RRA is subject to a minimum of age 65 or the member's normal pension age (NPA) less 3 years if later (RRA minimum or "RRAM").
For the purposes of determining the rate of ERRBO contributions payable, NPA means a member's State Pension Age (SPA) as defined in legislation at the time the contribution rate is determined (subject to a minimum of 65). Any change in a member's NPA (as defined in this paragraph) automatically changes the member's RRA (and RRAM). For example, if a member sees an increase in NPA from 68 to 69, RRA will also increase by one year.
Further limits on the amount of ERRBO contributions may also apply, in which case a limited RRA (referred to as "RRAL") will apply, which may be later than RRAM as in the table below. See Calculation of limits on ERRBO agreements for more detail.
ERRBO agreements may only provide for a member's NPA to be reduced by a whole number of years, except for members with non-integral NPAs in which case integral RRAs may be selected.
Examples of RRA:
NPA | 65 years 3 months | 65 years 11 months | 66 years | 66 years 5 months | 67 years | 67 years 7 months | 68 years | 69 years | 70 years |
RRAM | 65 | 65 | 65 | 65 | 65 | 65 | 65 | 66 | 67 |
Other RRA options | n/a | n/a | n/a | 66 | 66 | 66 67 | 66 67 | 67 68 | 68 69 |
A member entering an ERRBO agreement to target an RRA after their RRAM may later increase the rate of ERRBO payments (subject to satisfying any other criteria as below) to secure an earlier RRA for service after the date of commencement of revised contributions. Thus, a member may have up to 3 different RRAs applying to different periods during which ERRBO contributions are paid. In this case, early or late retirement factors will apply for some buy-out periods at retirement (see early and late retirement guidance).
The buy-out period is the period starting from the date from which the buy-out agreement takes effect and ending with the date on which it ceases for whatever reason.
Factors for non-integral periods between NPA and RRA (i.e. for non-integral NPAs) should be determined by interpolation between the factors for integral periods either side of the required fractional period.
At the initial application for an ERRBO agreement, the contributions payable should be determined from the table based on age attained in complete years as at the 31 March immediately prior to the commencement of the buy-out period. Payment of contributions will normally commence on 1 April in any year, though may commence later provided the contributions are applied for all pensionable service in that scheme year.
Any subsequent increase in the ERRBO agreement may be made subject to the restriction on RRAL as in Calculation of limits on ERRBO agreements. The initial rate of contributions for a second and third ERRBO agreement should be determined from the table based on age attained as at the 31 March immediately prior to the increase of the buyout period.
ERRBO contributions will be subject to regular review. Revised factors will only take effect from a 1 April. From such 1 April the age-related rate payable for all ERRBO paying members should be re-determined based on the age of the member at the date of the original election and increase date(s) if applicable.
An ERRBO agreement is due to be in force from the commencement date until the selected RRA. On continuation in service after RRA a member may elect for contributions to an ERRBO agreement to continue to NPA or to cease at any 31 March between RRA and NPA. Normal rules on refund of ERRBO contributions apply for cessations between RRA and NPA on any other date. Actuarial adjustments will be applied to benefits earned during ERRBO payment on retirement before or after RRA. The adjustments are set out in the early and late retirement guidance.
A member has limited options to suspend and recommence an ERRBO agreement and can do so on hardship grounds only. An ERRBO agreement can be suspended for up to one scheme year. If the member fails to resume payment of contributions at the start of the scheme year following the year of suspension the agreement is deemed to have been revoked. Only one period of suspension is permitted in the buy-out period. No further ERRBO agreements will be permitted.
A member may revoke an ERRBO agreement and any suspension of contributions (except on hardship grounds) will be effective from the 31 March immediately preceding cessation of payment. There is no option to reduce the level of ERRBO contributions. Any ERRBO contributions paid since the preceding 31 March will be refunded. The benefits earned over any period over which ERRBO contributions have been paid will remain subject to the RRA agreed. For service following cessation of ERRBO contributions the member's normal NPA will apply.
On breaks in pensionable service ERRBO agreements will automatically recommence on the same basis as that on which they were agreed at latest exit (subject to any revision of contributions in accordance with the above information).
