Retiring early from the Cardiff and Vale of Glamorgan Pension Fund

The Cardiff and Vale of Glamorgan Pension Fund is the Local Government Pension Scheme fund for non-teaching staff at Cardiff Council, the Vale of Glamorgan Council, Cardiff Metropolitan University, Cardiff and Vale College and a number of other public bodies. It is run by Cardiff Council's pensions team. The question we are asked most often by its members is whether they can afford to stop work before their normal retirement age.

When you can take your pension

Once you have been in the scheme for at least two years, you can choose to take your pension from age 55. To do that you normally have to leave your job. The earliest age is due to rise to 57 from 6 April 2028, although that change does not apply to ill health retirement. You must take your pension by age 75.

Your pension is paid in full from your Normal Pension Age. For pension built up since April 2014, that age is linked to your State Pension age and is never lower than 65. Pension built up before April 2014 keeps its own protected Normal Pension Age, which for most people is 65. If you have service on both sides of 2014, the two parts can therefore have different Normal Pension Ages.

What going early costs

If you take your pension before your Normal Pension Age, it is reduced to allow for it being paid for longer. The reduction depends on how many years early you take it. The Government changed the reductions on 13 July 2026, and the current figures for retirements from 1 August 2026 include:

• 1 year early: pension reduced by 5.0%
• 3 years early: pension reduced by 13.9%
• 5 years early: pension reduced by 21.5%
• 7 years early: pension reduced by 28.1%
• 10 years early: pension reduced by 36.6%

As an example, a pension of £12,000 a year taken five years early would be reduced by 21.5%, to £9,420 a year. The reduction is permanent. The pension still rises each year with the Consumer Prices Index, but from the lower starting point. If you had an estimate before August 2026, it was worked out on the old figures, so it is worth asking the fund for a fresh one.

When the reduction can be smaller, or nothing

Several rules can reduce or remove the cost of going early, and they are easy to overlook.

• The 85-year rule. If you were in the LGPS at any time between 1 April 1998 and 30 September 2006, you may be protected. The rule is met when your age and your years of membership add up to 85. It applies automatically if you retire after 60. Between 55 and 60 it only applies if your employer agrees.
• Redundancy or business efficiency. If you lose your job for either reason at 55 or over, your main pension is paid straight away with no reduction.
• Ill health. If your employer's independent doctor certifies that you are permanently unable to do your job, your pension can be paid at any age without reduction, and in some cases it is increased.
• Your employer's discretion. Your employer can choose to waive all or part of a reduction. Each employer has its own policy, so it is worth asking for yours.

Flexible retirement is another route. If your employer agrees, you can reduce your hours or move to a less senior role from 55 and take some or all of your pension while you carry on working and paying in.

Members who were in a public service pension scheme before April 2012 may also be covered by the underpin, the protection brought in after the McCloud court case. The fund checks this automatically when you retire, and if your pension for the years 2014 to 2022 would have been higher in the old final salary scheme, it is increased.

The tax-free lump sum

When you retire you can give up some of your pension in exchange for a tax-free lump sum. For every £1 a year of pension you give up, you receive £12 in cash. The most you can take is 25% of the capital value of your benefits, and HMRC caps tax-free cash at £268,275 for most people. If you have service from before April 2008, you also receive an automatic lump sum of three times the pension built up in that period.

Whether swapping pension for cash is good value depends on how long you live. Giving up £1,000 a year of pension produces £12,000 now. If you draw your pension for twenty years, the pension you gave up would have paid you £20,000, before the yearly increases. Some people need the cash, for example to clear a mortgage. Others are better off keeping the income.

If you pay AVCs

The fund's Additional Voluntary Contribution scheme is run by Prudential. When you take your LGPS pension, you may be able to take some or all of your AVC fund as tax-free cash, within the HMRC limits. Using the AVC fund for your tax-free cash can mean giving up less of your main pension. AVCs are invested, so their value can fall as well as rise, and the right way to use them depends on everything else you have.

Bridging the gap to your State Pension

Most people who retire early have several years before their State Pension starts. How you cover those years matters as much as the LGPS figures. Savings, ISAs, a partner's income or other pensions can all help, and the order you draw them in affects how much tax you pay. A smaller LGPS pension taken early can sometimes be the right answer, and sometimes waiting a year or two makes a real difference. It depends on your numbers.

Where to start

• Log in to My Cardiff and Vale Pension, the fund's online service, for your current figures, or contact the pensions team on 029 2087 2334.
• Check whether you were a member between April 1998 and September 2006, as the 85-year rule could change your figures.
• Ask your employer for its policies on flexible retirement and on waiving reductions.

The fund can tell you what your benefits are, but it cannot give you financial advice. That is where we come in. We look at your LGPS pension alongside your other savings, your State Pension and your tax position, and show you what retiring at different ages would mean for your income. We do not advise on transferring out of the LGPS, and for most people the guaranteed pension is best left where it is. Our first meeting is free, at our office in Thornhill, in north Cardiff, or at your home.