These factors are used to reduce the benefits of STPS members who wish to retire before their normal pension age.

This section refers only to the early payment of full retirement earned pension benefits, Additional Pension and pension credits of STPS members.

For members retiring early from active service, the standard reduction of 3% a year applies for a maximum of 3 years between age 65 and a member's normal pension age. However, members do have the option to pay contributions to buy out the standard reduction ("buy-out election") for a period of up to 3 years.

SPPA have determined that in cases where the standard reduction is to be applied for a non-integer number of years, it is to be calculated as a reduction of 0.25% for each complete month between age 65 (or the member's age at retirement, if later) and the member's normal pension age, up to a maximum of 36 months.

The benefits payable on early retirement from active service are determined by applying the standard reduction (if any) and the appropriate reduction factor (if required) to the accrued benefit entitlement at the date of retirement using the formula in Active members below and factors in the Factor Tables (STPS).

The benefits payable on early retirement from deferred status are determined by applying the appropriate reduction factor to the accrued benefit entitlement at the date of retirement using the formula in Deferred members - pension not subject to a buy-out election below and factors in the Factor Tables (STPS). An adjustment to the early retirement reduction is required for those members who made a buy-out election. The formula in Deferred members - pension subject to a buy-out election below should be used for any part of a deferred member's pension that is subject to a buy-out election.

Early retirement pension =

Full retirement earned pension x standard reduction x Factor ER7

+ Additional Pension x Factor ER8

- Pension debit(s) pension x Factor ER8

Points to note in using the factors:

• Full retirement earned pension includes any transferred-in pension and any extra pension purchased through a faster accrual election.
• Additional Pension and pension debits need to be revalued to the date of retirement.
• The standard reduction should be adjusted accordingly if a member has made a buy-out election. If a member revokes, or is taken to revoke, the buy-out election, the election only applies to the pension accrued before the date of the revocation. In such cases, separate calculations are required for the elements of the pension which are and are not covered by the buy-out election, with the total pension payable being the sum of these separate calculations.
• Factor ER7 should be selected with reference to a member's age at retirement (in years and complete months).
• Factor ER8 should be selected with reference to the period to a member's NPA (in years and months, with part months rounded up to the nearest month).
• Reduced benefits should be calculated before commutation option is exercised.

Early retirement pension =

Full retirement earned pension x Factor ER8

+ Additional Pension x Factor ER8

- Pension debits pension x Factor ER8

Points to note in using the factors:

• Full retirement earned pension includes any transferred-in pension and any extra pension purchased through a faster accrual election.
• Additional Pension and pension debits need to be revalued to the date of retirement.
• Factor ER8 should be selected with reference to the period to a member's NPA (in years and months, with part months rounded up to the nearest month).
• Reduced benefits should be calculated before commutation option is exercised.

Early retirement pension =

Full retirement earned pension x [Factor ER8 + standard reduction x N x Factor ER9]

+ Additional Pension x Factor ER8

- Pension debits pension x Factor ER8

where standard reduction is 0.03.

where N is the minimum of:

• the number of years for which the standard reduction has been bought out; and
• the period to the member's NPA (in years and months, with part months rounded up to the nearest month) minus 1/24.

Points to note in using the factors:

• Full retirement earned pension includes any extra pension purchased through a faster accrual election which is also subject to a buy-out election.
• Additional Pension and pension debits need to be revalued to the date of retirement.
• If a member revokes, or is taken to revoke, the buy-out election, the election only applies to the pension accrued before the date of the revocation. In such cases, separate calculations are required for the elements of the pension which are and are not covered by the buy-out election. The former is covered by this section and the latter by Deferred members - pension not subject to a buy-out election above, with the total pension payable being the sum of these separate calculations.
• Factor ER8 should be selected with reference to the period to a member's NPA (in years and months, with part months rounded up to the nearest month).
• Factor ER9 should be selected with reference to a member's age at retirement (in years and complete months).
• Reduced benefits should be calculated before commutation option is exercised.

The formulae set out above make explicit allowance for pension debits (which includes annual allowance debits). The pension debits are also reduced to reflect that the pension debit will be in effect for a longer period.

Early retirement reductions apply to pension credit members. Calculation of the early retirement pension for pension credit members follows the same process outlined above for STPS deferred members who did not make a buy-out election (see Deferred members - pension not subject to a buy-out election above).