20 Feb 2015, 10:44pm

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    Normal Retirement Age

    DB pensions are usually payable from some target age, historically 60 or 65, which is the normal retirement age for that scheme. If you retire earlier, then the pension has to pay out for longer, so they reduce the annual amount they pay out to account for that. This is called an actuarial reduction. Only your pension provider can tell you what the reduction is. It is often in the 5% per year drawn early ballpark, but it is whatever is in the rules.

    It has less meaning for a DC pension, though it informs example pension illustrations

    Not to be confused with the State Pension Age. A surprising number of people seem to believe they can only retire at the SPA – you can use a private pension earlier (from 55 though this age is rising over time) and indeed some professions such as sportsmen retire much earlier as they come off the peak of their physical prowess

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