What is the difference between a reduced, an unreduced and a full pension?
A defined benefit pension plan will define the amount of pension payable at the normal retirement age. If the member retires before the normal retirement age, the pension will generally be reduced to reflect the fact that payments will start sooner and be made for a longer time period. The reduction may be calculated so that it has an actuarially equivalent value to the normal pension or can be a fixed percentage per month by which the early retirement date precedes the normal retirement date. The plan may provide that if the member meets certain age/service requirements, the pension will be paid without any penalty for early retirement. The pension is then unreduced. The plan may also provide that after a certain number of years of pensionable service, the member will no longer be required to contribute and accrue service under the pension plan. The member has then at that point accrued a full pension.
