If you have two or more years’ membership in the Local Government Pension Scheme (LGPS) you can choose to take your pension anytime between age 55 and 75, or earlier through ill health. There are several options around how and when you take your pension.
The scheme changed on 1 April 2014, if you have benefits that built up both before and after this date, you will have two normal pension ages (NPA):
- Pension built up after 1 April 2014 in the career average revalued earnings scheme – NPA is linked to your State Pension age
- Pension built up before 31 March 2014 in the final salary scheme – NPA of age 65
Generally, in the LGPS, you must take all of your pension benefits at the same time. Your pension benefits will be affected differently depending on the age you take your pension and how you access them. There is the option to take, or increase your lump sum to a maximum amount. To find out more about this and how we work out your pension benefits please visit our calculating your benefits section.
Choosing when and how you take your benefits is an important decision. To help you plan and make decisions around your retirement, you can login to your online My Pension account and use the calculator to run your own pension estimate.
If the benefits you have are currently on hold please read our accessing benefits on hold section.
|Type of retirement||Minimum age for retirement||Employers permission needed?||Are reductions applicable?||Do I need to leave employment?|
|Normal retirement||State Pension age||No||No||Yes|
|Voluntary early retirement||55||No||Yes||Yes|
* Must have met the two year vesting period and meet the criteria. There are three tiers of ill health depending on the severity of the condition.
The earliest you can take your benefits is age 55. If you choose to retire before your normal pension age (NPA) early retirement reductions will normally apply to your benefits. This is because we will be paying your pension for longer.
The easiest way to think about this is to look at your pension benefits like a birthday cake. If we are going to pay your benefits for 20 years then we cut the cake into 20 equal slices. But if you want to take your pension five years early, then we would need to cut it into 25 equal slices. Each of these slices will therefore be slightly smaller in size. If you wanted to take it 10 years early, then we would cut it into 30 equal slices, meaning each slice is smaller still.
Retiring at 65 will mean you are retiring at Normal Pension Age and will receive 25 equal slices.
All calculations above are based on a life expectancy of 90.
Mrs Harrison takes her pension at age 59. As her State Pension age is 67 her benefits built up after 1 April 2014 will have an eight year reduction applied (67 – 59). As Mrs Harrison also has benefits built up before 1 April 2014, this part of her benefit would have a six year reduction applied (65 – 59).
If you were a member of the Scheme before 1 October 2006, you may have some protection to your benefits under the 85 year rule. This helps protect your benefits from some early retirement reductions.
Ultimately, retiring voluntarily before your NPA is a personal choice. Your online My Pension account allows you to calculate your own pension estimates between age 55 and your NPA. These figures will include any 85 year rule protections and subsequent reductions helping you plan for the right time to access your LGPS benefits.
You can stay in the Scheme beyond your normal pension age (NPA) up to age 75.
Your benefits are increased if you choose to take them later than your NPA, as we don’t expect to pay them for as long.
You may have two different NPAs in the Local Government Pension Scheme (LGPS) depending on when you started:
- For pension built up after 1 April 2014 (career average revalued earnings (CARE) scheme) your NPA is linked to your State Pension age.
- For pension built up before 31 March 2014 (final salary scheme) your NPA is 65.
Mrs Jones has a State Pension age of 67 and retires late at age 68, she would then be drawing her final salary benefits three years late and her CARE benefits one year late.
We add a percentage increase for each day after your NPA. The increase is calculated using guidance provided by the government actuary’s department.
When you meet the minimum retirement age (currently 55), your employer can allow you to reduce your hours or move to a lower grade job and draw all or some of your pension. This is a way to enhance your work/life balance while easing you gradually towards full retirement. You can then continue to build up pension benefits in your new job.
Your employer will have a policy on flexible retirement, so speaking to them is the first thing to do if you are considering this option.
There are some other things to consider:
- You must have at least two years’ membership.
- If you are below your normal pension age, your pension will be reduced (if you have 85 year protection this will automatically apply).
- Your pension is taxable, as part of your income. Depending on your new salary you may pay tax on your pension.
- Whether the combined income of your pension and job is enough for your needs.
What do we mean by all or some?
If you have decided to flexibly retire, and your employer agrees, you would have to take all the benefits you may have accrued before 1 April 2008 plus:
- All, some or none of the benefits accrued between 1 April 2008 and 31 March 2014.
- All, some or none of the benefits accrued from 1 April 2014.
- Any additional voluntary contributions (AVC) that started before 13 October 2001.
If you have any other additional contributions they can also be taken.
If your employer agrees to your flexible retirement request then you would automatically rejoin GMPF, building up further pension benefits.
Another way of easing into retirement is to look at flexible working, here you drop your hours and don’t take your pension. Again, this is something to discuss with your employer.
If your employment ends because of redundancy or in the interests of efficiency, your benefits are payable immediately without any early retirement reductions. This is providing you are age 55 or over and have been in the Local Government Pension Scheme (LGPS) for two years or more.
Your employer will make us aware that you are leaving your job on this basis and confirm you have the right to the immediate payment of unreduced pension benefits (including any lump sum available). Your employer will also let us know if you have been awarded any enhancement to your pension.
If you are under age 55 and have over two years’ membership, your benefits will be put on hold until they are due for payment from age 55. Alternatively, you can ask us about transferring your pension to another registered pension scheme.
If you’re looking at retiring abroad the first thing you need to decide is whether to have your pension paid into a United Kingdom bank account or a local bank in the country you are moving to. If you choose this second option we will pay your pension directly into your bank account via Convera UK Ltd. Please read Can my pension be paid abroad? for more information about how to do this, the tax implications, and life certificates.
Since 1 April 2014, the Local Government Pension Scheme (LGPS) has been a career average revalued earnings (CARE) scheme. We work out your benefits using your pensionable pay each year and adding a portion of this to your CARE pension.
Any changes to your salary will be reflected in your pension from the date of change. For that reason, there isn’t the need for any protection against drops in your pay.
This is different for any benefits built up before 1 April 2014.
Benefits built up before April 2014
We work out your benefits using your full time equivalent final salary when you retire or leave Greater Manchester Pension Fund (GMPF). If you have a reduction in your pay – not through changing your hours – then this would reduce your benefits for the final salary part of your pension. If this happens close to your retirement then there are some protections.
Please note that any estimated pension figures provided on your online My Pension account and on your annual statement will be based on your salary at the time the figures are produced.
Best of the last three years: your final salary is your pensionable pay for the 365 days before you leave or take your pension benefits. Your employer will automatically go back a further two years and check if a better pensionable pay can be used.
The 3 in 13 rule: this is an option if you leave within ten years from the date of any pay reductions. You must ask your employer to base your final salary benefits on any three consecutive years’ pay (ending with 31 March) out of your final 13 years. An average of these three years is then taken and inflation proofing is added. Please speak to your employer before taking your benefits as this isn’t automatically applied.
You can’t make use of this option to use earlier years’ pay in working out your benefits if the reduction or restriction to your pay was as a result of:
- the loss of a temporary increase in pay; or
- a reduction in your grade to take retirement benefits through flexible retirement.
What if these protections don’t apply?
If you plan on working more than ten years after any reductions to your pay then the 3 in 13 rule may not benefit you. You have the option to put your GMPF benefits on hold by Opting out of the Scheme and when doing this your final salary pay can be worked out using the protections above. You could then rejoin the LGPS, building a separate pension.
Should you then wish to combine your benefits you will be unable to as you have voluntarily opted out of the Scheme. Once your benefits are on hold you won’t be able to access these until you leave your current employment.
For more information and to view some examples please read the pay choices following a reduction in pay leaflet.