How factors affect your Retirement Income Builder
At USS the average member typically retires early, at age 64. It’s probably something you’ve given some thought to, but how could retiring early, or even late affect your pension?
Like most major financial decisions, it’s important to come up with a plan that suits you and the lifestyle you want but which also maximises how much you will receive in retirement. Retiring late or early — before or after Normal Pension Age — will have an impact on the pension you receive, and we use factors to work out what that impact will be.
Factors
To work out how much pension you will get from your Retirement Income Builder, we use factors, and depending on when you choose to retire, we may apply an early or a late retirement factor.
Retiring early
The early retirement factor determines how much your benefits will be reduced if you take them before the Normal Pension Age (NPA), which is currently 66. Your benefits would be reduced because your pension would be paid for longer. Generally, the earlier you take your benefits, the bigger the reduction.
Because the NPA has changed over time, the age by reference to which your benefits are reduced depends on when you built them up. The factor is a percentage applied according to how many years (and months) before the relevant NPA you retire.
For example, if you take benefits one year before the NPA that applies to them, they’ll currently be reduced by 5.2%, or if it’s two years they’ll be reduced by 10%. The factors are reviewed from time to time and are subject to change.
Retiring late
If you retire after your NPA, we’ll be paying your pension for less time and so your benefits are typically increased. How the factors work is more complicated as there are different late retirement factors depending on when you built your benefits, and often you’ll receive a combination of several of these, to account for the different blocks of benefits you’ve built up.
Next steps
A good place to start to work out how retiring late or early affects your pension, is to use the Benefit Calculator in My USS. This will provide an estimate of how your pension can change depending on when you retire. However, when you’re within 12 months of taking your retirement benefits, and want a more accurate picture it’s important to get a retirement quote.
- More information on late retirement factors is available in the late retirement factors section of the factors used by USS page.
- Log in to My USS and use the Benefit Calculator.
- To see all of the factors that might apply to your Retirement Income Builder benefits, visit the factors used by USS page.