civil service pension query

All of the above is right. I was in almost exactly the same position myself: left the CS at 54 with 31 years service and moved into LGPS. Although the public sector transfer club principles do indeed state that if there is any transfer between schemes then there will be an equivalence of value, I could not get past the fact that if I gave up the deferred CS pension benefits by transferring them into LGPS I was giving up a protected right to take those CS benefits (albeit on a reduced basis) right now. That is a great feeling to have when the NPA for LGPS is 66. So I took the view that a spreading of risks is a good thing. The CS Pension is sitting there and will be uprated in line with CPI (unlike the pay of the colleagues who I left behind who will have been subject to 1% rises for a full 10 years by 2020).

The actuarial reduction in the CS pension for taking it early is, as others have said, slightly less than 5% p.a. More like 4.2% or 4.3%. So even if you did take it at age 55, you would end up getting about 78-79% of the full entitlement. But remember, you would be getting that for 5 years when you would otherwise have got nothing. I worked out that I would be about 80 by the time a theoretically higher annual entitlement would have wiped out the money accumulated during those 5 years (more if you transfer into LGPS and stay until NPA). Essentially, you have to remember that you are a long time dead.

Suffolk_lass wrote: »

I thought that new entrants to local Government scheme were based on averaging salary as opposed to final salary

Yes, but a transfer in from another public sector scheme, if done within 5 years of leaving the old scheme, will carry over a final salary service credit with a final salary link. If the OP's final salary NPA in the PCSPS is 60, then they would lose that, but get a bigger final salary service credit in the LGPS than that forgone in the PCSPS (assuming the transfer is done under Club terms, so within 12 months of joining the new scheme).

Acquinas wrote: »

All of the above is right. I was in almost exactly the same position myself: left the CS at 54 with 31 years service and moved into LGPS. Although the public sector transfer club principles do indeed state that if there is any transfer between schemes then there will be an equivalence of value, I could not get past the fact that if I gave up the deferred CS pension benefits by transferring them into LGPS I was giving up a protected right to take those CS benefits (albeit on a reduced basis) right now. That is a great feeling to have when the NPA for LGPS is 66. So I took the view that a spreading of risks is a good thing. The CS Pension is sitting there and will be uprated in line with CPI (unlike the pay of the colleagues who I left behind who will have been subject to 1% rises for a full 10 years by 2020).

The actuarial reduction in the CS pension for taking it early is, as others have said, slightly less than 5% p.a. More like 4.2% or 4.3%. So even if you did take it at age 55, you would end up getting about 78-79% of the full entitlement. But remember, you would be getting that for 5 years when you would otherwise have got nothing. I worked out that I would be about 80 by the time a theoretically higher annual entitlement would have wiped out the money accumulated during those 5 years (more if you transfer into LGPS and stay until NPA). Essentially, you have to remember that you are a long time dead.

some good points in there..but also don't forget if the CS pension is taken whilst still working in LG, it'll likely all be taxed at 20% and some may end up as 40%. I know this is what will be happening to me when my CS Classic becomes payable at 60, by then it'll all be hit at 40%

Galoglas wrote: »

I spoke to the tax office and that is correct.If I was to take the lump sum it would take me over the higher tax threshold for that tax year.

I thought you said you wanted to retire around 60 in your original post? Why take your CS pension early and sacrifice over 20% and pay extra tax if you have been offered work with LG?

I don't understand why you would not work for LG for five years then resign. Taking your preserved and frozen CS pension (which will have index-linked since you left it) at that point and then have the second income burst when your LG pension age is reached (might be SRA at same time) - the same thing would apply - no actuarial reduction if you wait until scheme pension age.

For me the decision will be whether I top up my state pension by making lump-sum NI contribution payments for the 5 years after I stop working before SRA to compensate for the opted out SERPS that I have in my employment history - the payback period is only 7 years for this based on today's rates.

It is true of course that it you were to take your CS Pension now, or indeed at any time while you are still working for the LA, that it would be taxable at your marginal rate. But that situation could still be mitigated by prudent tax planning. You won't be able to recycle your retirement lump sum by paying it into a SIPP or APCs/AVCs in the LGPS etc, but would be able to with some of your salary. The lump sum would be non-taxable of course so you could get the motorhome before you reach LGPS NPA. There is of course a balancing argument for simply "sitting on it" and letting it build. I think it all comes down to personal circumstances and lifestyle choices.

On the other hand - and this is where I think we need some input from an LGPS expert - you can access your LGPS core pension entitlement from age 55. If you request this yourself then it will be payable at a reduced rate (similar to the arrangement for the CS pension), but if it should so pass that you were made redundant at any point then the LGPS is obliged to pay out in full without actuarial reduction.. What I'm not sure about though is whether that only applies to pension built up by virtue of your own contributions via payroll or whether it would apply to transfer club entitlement too. If it did though that could be quite a powerful factor in favour of transferring in.