Options with a Final Salary Scheme

If you are in a final salary pension scheme, you will receive a pension based upon your final pensionable salary and your pensionable service. The amount will depend upon the scheme's accrual rate; the proportion of your salary that you receive in pension for each year of service. For example, if the accrual rate is 80ths, you will receive 1/80th of pensionable salary for each year of completed pensionable service.

Some schemes may also offer a tax-free lump sum, which will be limited to 25% of the capital value of your pension.

What Happens If You Want to Retire Early?

Although some schemes won't allow you to take your benefits until age 65, others may let you take them earlier; ask your pension administrator about the rules of your particular scheme. If you are permitted to draw your pension earlier than the scheme's normal retirement age, the amount of pension will generally be reduced to take account of the early payment.

Currently, early payment of pension (except on grounds of ill health) is not permitted before age 50; this will rise to 55 in 2010.