Teachers pension actuarial reduction

22225

Hello
Is anyone on here knowledgable about teachers pension?
I would like to know how much my career average pension would be reduced by if I took it early. 
For example I am due to take it at state pension age which will be at least 68 but more likely 70 by the time I retire. If I take it at 65, what percentage is it reduced by?
I have googled but I cant find it. 3% is mentioned but I dont know if it has to be within 3 years of normal pension age???
Does anyone know ?
Thank you

Dazed_and_C0nfused

Factors are here 

https://www.teacherspensions.co.uk/members/resources/factors.aspx

9% doesn't sound too bad for 3 years (if correct). 13-14% wouldn't be unusual in some schemes.

22225

Thanks a lot. What if I wanted to take it more than 3 years early??? Is it still 3% a year? I couldn't work it out. I did try to look at that document before but I found it too hard.

hugheskevi

I am due to take it at state pension age which will be at least 68 but more likely 70 by the time I retire.

The legislative position for State Pension age is that it is currently 66, increasing to 67 between 2026-28 and to 68 between 2044-46. There are reviews every 6 years that make recommendations to DWP Ministers. The last review was in 2023, and the question about bringing forward the increase to age 68 was ducked - "The Government plans to have a further review within two years of the next Parliament to reconsider the rise to age 68."

The Labour Party have not made any comments about State Pension age.

I would like to know how much my career average pension would be reduced by if I took it early. 

It sounds like you are a long way from State Pension age. Early retirement factors are reviewed regularly, to take account of the discount rate, changes in longevity, changes in things like proportion of members with a partner at retirement, and so forth. 

The current factors are based on the SCAPE discount rate, which is CPI+1.7%. This is the lowest discount rate in decades, possibly ever, and is based on expected GDP growth. A low discount rate is good for early retirement factors from a member perspective, but it does mean that it would be prudent to assume the current factors may worsen in the future.

If I take it at 65, what percentage is it reduced by?

I have googled but I cant find it. 3% is mentioned but I dont know if it has to be within 3 years of normal pension age???

The factors are set out in tables 407 (active members) and 408 (deferred members) of this linked spreadsheet. 

A member can commence their pension early with actuarial reduction anytime after minimum pension age, which is 55, increasing to 57 from April 2028.

A deferred member with State Pension age of 68 commencing their pension at age 65 would have a reduction of 14.1%.

If a member retires from active service, they are entitled to a 'standard reduction' which is 3% and applies in relation to a maximum of 3 years between age 65 and a member’s normal pension age (applied pro-rata for part-years). Hence an active member with a State Pension age of 68 who commences pension at age 65 would have a reduction of 9%.

What if I wanted to take it more than 3 years early??? Is it still 3% a year?

It is more than 3% per year. For example, taking pension at age 63 from deferred status for a member with State Pension age of 68 would be a reduction of 21.8%, or from active status a reduction of 17.3%.

Dazed_and_C0nfused

hugheskevi said:

I am due to take it at state pension age which will be at least 68 but more likely 70 by the time I retire.

The legislative position for State Pension age is that it is currently 66, increasing to 67 between 2026-28 and to 68 between 2044-46. There are reviews every 6 years that make recommendations to DWP Ministers. The last review was in 2023, and the question about bringing forward the increase to age 68 was ducked - "The Government plans to have a further review within two years of the next Parliament to reconsider the rise to age 68."

The Labour Party have not made any comments about State Pension age.

I would like to know how much my career average pension would be reduced by if I took it early. 

It sounds like you are a long way from State Pension age. Early retirement factors are reviewed regularly, to take account of the discount rate, changes in longevity, changes in things like proportion of members with a partner at retirement, and so forth. 

The current factors are based on the SCAPE discount rate, which is CPI+1.7%. This is the lowest discount rate in decades, possibly ever, and is based on expected GDP growth. A low discount rate is good for early retirement factors from a member perspective, but it does mean that it would be prudent to assume the current factors may worsen in the future.

If I take it at 65, what percentage is it reduced by?

I have googled but I cant find it. 3% is mentioned but I dont know if it has to be within 3 years of normal pension age???

The factors are set out in tables 407 (active members) and 408 (deferred members) of this linked spreadsheet. 

A member can commence their pension early with actuarial reduction anytime after minimum pension age, which is 55, increasing to 57 from April 2028.

A deferred member with State Pension age of 68 commencing their pension at age 65 would have a reduction of 14.1%.

If a member retires from active service, they are entitled to a 'standard reduction' which is 3% and applies in relation to a maximum of 3 years between age 65 and a member’s normal pension age (applied pro-rata for part-years). Hence an active member with a State Pension age of 68 who commences pension at age 65 would have a reduction of 9%.

What if I wanted to take it more than 3 years early??? Is it still 3% a year?

It is more than 3% per year. For example, taking pension at age 63 from deferred status for a member with State Pension age of 68 would be a reduction of 21.8%, or from active status a reduction of 17.3%.

Interesting, I wasn't aware there was that difference between active and deferred members. 

22225

Thank you 

drummersdale

I know I am ambushing this thread and slightly off topic as I am interested in a CS Classic Pension actuarial reduction but if I am reading this correctly and my wife took partial retirement at age 58 she would receive 91% of her Classic pension - so effectively lose 9%?  Is that correct?

Dazed_and_C0nfused

drummersdale said:

I know I am ambushing this thread and slightly off topic as I am interested in a CS Classic Pension actuarial reduction but if I am reading this correctly and my wife took partial retirement at age 58 she would receive 91% of her Classic pension - so effectively lose 9%?  Is that correct?

That's my understanding yes.

However I believe new factors are due to be published so it might be different before too long.

I don't know if the new factors will be better or worse but maybe @hugheskevi will know??

hugheskevi

Dazed_and_C0nfused said:

drummersdale said:

I know I am ambushing this thread and slightly off topic as I am interested in a CS Classic Pension actuarial reduction but if I am reading this correctly and my wife took partial retirement at age 58 she would receive 91% of her Classic pension - so effectively lose 9%?  Is that correct?

That's my understanding yes.

However I believe new factors are due to be published so it might be different before too long.

I don't know if the new factors will be better or worse but maybe @hugheskevi will know??

The new factors are in the spreadsheet at this link and are already in use.

I think the reduction is now 0.916, ie, slightly better with a reduction of 8.4%.

drummersdale

Thanks @hugheskevi much appreciated, plus the link to the new spreadsheet