An early payment reduction applies to members who retire 'early' in normal health. 'Early' means, for active 2015 scheme members, those who retire before Normal Pension Age (NPA), and for deferred 2015 scheme members (including pension credit members), those who retire before reaching their State Pension Age (SPA) (Use the State Pension Age according to legislation at the date of retirement).
Guidance for calculating the early payment reduction applied to members retiring early from active service is set out in Members retiring from active service below.
Guidance for calculating the early payment reduction applied to members retiring early from deferred status is set out in Members retiring from deferred status below.
The surviving adult's pension and eligible child's pension is calculated using the member's pension before deduction of the early payment reduction but after any allowance for commutation.
The member's retirement account must specify the early payment reductions applying to each amount of retirement earned pension and retirement added pension.
The early payment reduction applying to each amount of retirement pension (i.e. earned, added (self only) and added (all beneficiaries)) should be calculated using the following formula:
Early Payment Reduction = Retirement pension x (1 - FA)
where:
Retirement pension is taken from the relevant retirement account at the date of retirement and should include transferred in pension.
FA is the early payment reduction factor from Table A, chosen by reference to the number of years and complete months to the member's NPA at the point of retirement.
For the avoidance of doubt, do not deduct any commutation amount from the amounts of retirement pension prior to carrying out the calculation directly above.
The member's annual rate of full retirement pension at retirement is then calculated by subtracting the early payment reductions from the member's full retirement pension specified in the member's retirement account (together with any reductions for commutation). However, if the member or employer exercise the option to buy out any early payment reduction, the annual rate of full retirement pension is calculated without deduction of that early payment reduction. See Option to buy out the early payment reduction for details of how to calculate the cost of buying of the early payment reduction.
The deferred member's account must specify the early payment reductions applying to each amount of deferred pension and deferred added pension.
The early payment reduction applying to each amount of deferred pension (i.e. earned, added (self only) and added (all beneficiaries)) 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, chosen by reference to the number of years and complete months to the member's SPA at the point of retirement.
For the avoidance of doubt, do not deduct any commutation amount from the amounts of deferred pension prior to carrying out the calculation directly above.
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). However, if the member or employer exercise the option to buy out any early payment reduction, the annual rate of full retirement pension is calculated without deduction of that early payment reduction. See Option to buy out the early payment reduction for the cost of buying of the early payment reduction.
The annual rate of pension payable to a pension credit member is calculated with subtraction of the early payment reduction.
The early payment reduction applying to the pension credit member's pension can be calculated using the following formula:
Early Payment Reduction = Pension credit x (1 - FB)
where:
Pension credit is taken from the member's account at the date of retirement and should include pension increases awarded under the provisions of the Pensions (Increase) Act (Northern Ireland) 1971.
FB is the early payment reduction factor from Table B, chosen by reference to the number of years and complete months to the member's SPA at the point of retirement.
For the avoidance of doubt, do not deduct any commutation amount from the amount of pension credit prior to carrying out the calculation directly above.
The pension credit member's annual rate of pension at retirement is then calculated by subtracting the early payment reduction from the pension credit amount at the date of retirement (i.e. including pension increases awarded under the provisions of the Pensions (Increase) Act (Northern Ireland) 1971) together with any reductions for commutation.
