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  • FIRST POST
    Luis
    Civil Service Pension - no more lump sum, what to do?
    • #1
    • 11th Feb 05, 11:49 AM
    Civil Service Pension - no more lump sum, what to do? 11th Feb 05 at 11:49 AM
    Official MSE Insert:

    If you've arrived from Google, our fully researched Pensions guide may be helpful.

    Back to the original post...

    Hello,

    I am 28 yrs old, female and have just joined the Civil Service 'Premium' pension scheme, which no longer offers a lump sum on completion, and works on 1/60 contributions. I have about 5yrs worth of my old NHS pension scheme stored. I have the following questions:

    :confused: Should I transfer my NHS contributions in to my new civil service pension, which I understand I can do as part of the Public Sector Transfer Club (I am tempted to do this as I feel that the benefits of leaving a 5yr pension are few...?)

    :confused: What can I do to save / plan to get a lump sum for retirement - what are the best schemes or plans in order to achieve a little nest egg for retirement - which to be honest I was looking forward to from when I was in the NHS - drat the Civil Service for moving the goal posts!

    :confused: What can I do to top up my Civil Sevice Pension - as I have no intention of working until I am 60 (or even 65 as it looks like it is going to be, yuk), and want a decent pension on which to retire.

    Any advice would be most gratefully received,

    Luis.
    Last edited by MSE Zorica; 20-01-2014 at 5:48 PM.
Page 2
  • unspec
    Just to wait for the general election to pass and then make the changes they want anyway....

    If your a member (or your union is a member) of the PCS, you can get some more information here:

    http://www.pcs.org.uk

    I'm also looking at my pension (I'm on the Premium pension too), but it's impossible to make any long term plans with so much up in the air.

    Interesting times.
  • Annie SW
    I opted for the Classic pension, but the bit I really don't understand is why all the fuss and potential industrial action is about working til 65 ? I'd rather work until 65 than have my pension mucked about and no doubt reduced.
  • unspec
    I opted for the Classic pension, but the bit I really don't understand is why all the fuss and potential industrial action is about working til 65 ? I'd rather work until 65 than have my pension mucked about and no doubt reduced.
    by Annie SW
    Actually if they kept everything about my Premium pension the same, and just changed the retirement age to 65 I'd be quite happy. However it's the supposedly cost neutral move from a final salary based pension to a contribution based one that I find infuriating. If that part of the proposed change is cost neutral, why was it going to be forced onto Civil Servants rather than voted on?

    Regardless of the changes, I think and new pension should be for new applicants only. It's not fair to change a system people are already in, at the very least new entrants would be able to go in with their eyes open.
  • Annie SW
    That's it exactly. I'd assumed I was going to be working to 65 anyway.

    If it's being forced on us regardless it can only be to our disadvantage.
  • isasmurf
    However it's the supposedly cost neutral move from a final salary based pension to a contribution based one that I find infuriating.
    by unspec
    It's not moving to a contribution based scheme. Its moving from a final salary to an average career salary scheme. As far as I understand it, contributions will remain the same as they are now.

    I chose to remain in Classic for one simple reason, because there was the huge clause in the Premium scheme that stated that the increased contribution level of 3.5% of pay could be increased in the future. Classic contributions would remain fixed. However, having just read the consultation document it seems that there is an option for all schemes to have increased contribution rates should costs increase.

    The change in the age limit I am not bothered about. Most government departments now allow people to work up to 65 if they want to, and most people take this option up. Perhaps this is not the case in the NHS or with teachers. Interestingly the proposals suggest that those working after 65 could get a bigger pension in the future.

    What I would be concerned with is the change from Final Salary to Average Salary. On the face of it, it does look fairer, but without seeing the forumla for working out your pension I don't know if I would've been worse off or better off.

    If I remained in the Civil Service then I can see very little, other than the proposed increase in pension contributions to worry about here. The unions and the sheep that are members of the unions should see the bigger picture here.
  • sleepless saver
    If for example you work for 5 years, you will have 5 mini pensions, each one based on that year's pensionable income. Each mini pension will be uprated each year in line with inflation. That immediately makes it a worse deal than a career average system which is uprated in line with earnings. And even for people whose stay at the same grade throughout their careers that looks liek a worse deal than the present system where the final salary pension is in effect linked to earnings increases.
  • unspec
    Sorry when I said contributions based I meant every year your contributions go into a pot, your final pension is based on the size of that pot.

    I'm no accountant!

    Whatever you call it, I'd come off worse and I'm very angry that the Governmant is trying to force it onto us.


    EDIT: I thought those under the current Classic scheme cannot go over the 40 year limit? The move to a retirement age of 65 might not benefit those who max out the pension before then...
    Last edited by unspec; 25-03-2005 at 5:05 PM.
  • unspec
    If I remained in the Civil Service then I can see very little, other than the proposed increase in pension contributions to worry about here. The unions and the sheep that are members of the unions should see the bigger picture here.
    by isasmurf
    Of course, if the proposed changes went through in 2013 you wouldn't be on the Classic pension.
  • Luis
    Having only joined in September last year, I only had the choice of the premium or a Stakeholder, and felt the Premium option to be better - as a new entrant, I did not have the option of classic. Classic appears to have a lower contribution rate, automatic lump sum and works on 1/80ths - Premium works on 3.5% contributions, Optional lump sum and 1/60ths.

    My partner is still on classic (although slightly miffed at having joined just after Fresh Start), but his pension looks set to be changed in 2013 too. We had both looked forward to the abilty to retire earlier as our profession is very demanding.

    I think my main gripe is the uncertainty about what is happening. Plus how to adequatley fund my retirement! AVCs or extra savings seem to be the order of the day - but not until I get up the ladder a bit and can afford to put more by.
    "It was not my intention to do this in front of you. For that, I'm sorry. But you can take my word for it, your mother had it comin'."

    Overlord for the Axis of Evil (part time)
  • pippppster
    The tide is turning......
    The Labour government has, typically, taken the soft option.

    Britain has a public sector pension bill which is spiralling out of control, but the government are too spineless to tackle it.

    Equitable Life could only honour its promises to GAR policyholders by shafting all the non-GAR members.

    Similarly, with interest rates rising in the US, and the economic outlook worsening here and in the US, the government will only be able to honour its public sector pension pledges by shafting taxpayers...those non-public sector workers who actually create the wealth to pay public sector pensions.

    Make the most of your "premium" or "classic" public sector pensions.........the tide is turning
  • unspec
    The Labour government has, typically, taken the soft option.

    Britain has a public sector pension bill which is spiralling out of control, but the government are too spineless to tackle it.

    Equitable Life could only honour its promises to GAR policyholders by shafting all the non-GAR members.

    Similarly, with interest rates rising in the US, and the economic outlook worsening here and in the US, the government will only be able to honour its public sector pension pledges by shafting taxpayers...those non-public sector workers who actually create the wealth to pay public sector pensions.

    Make the most of your "premium" or "classic" public sector pensions.........the tide is turning
    by pippppster
    The funny thing is that most people I've talked to aren't too bothered about the move from 60 to 65 for the retirement age. It's the averaged salary change that is the big issue - and that's supposedly a cost neutral move.

    Plus, I'm a taxpayer too
  • erb
    Take Lump sum or not
    [QUOTE=Luis]

    The Premium scheme does offer a lump sum facility, but at a cost of giving up part of your pension - they take 1 off for every 12 taken as lump sum. Is this still a good deal, QUOTE]

    Coming back to to one of the original points is it better to take a lump sum, which is tax free, or the higher pension which is taxable :confused: .

    Assuming a basic rate taxpayer the 1 gross pension will pay 0.78 per annum indexed linked.

    Could the tax free lump sum of 12 produce a higher pension than the 1 per year? Say if you invested in an ISA you would need a rate of 6.5% yield to get 0.78 per annum. Not index linked but you still have your initial 12 investment. What would an indexed linked annuity produce? Can any of the experts confirm.
    Last edited by erb; 26-03-2005 at 8:10 PM.
    Regards
    erb
  • dunstonh
    Under current tax rules its best to take the maximum tax free lump sum. Then invest it tax free to provide a tax free income. Plus the lump is yours.
    I am a Financial Adviser. Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
  • Luis
    Aaaah - to have a lump.............

    "It was not my intention to do this in front of you. For that, I'm sorry. But you can take my word for it, your mother had it comin'."

    Overlord for the Axis of Evil (part time)
  • thefirs
    Under current tax rules its best to take the maximum tax free lump sum. Then invest it tax free to provide a tax free income. Plus the lump is yours.
    by dunstonh
    In what tax-free investment vehicle would you suggest placing a decent-sized lump sum (say 50k)? Using an ISA would take 7 years to dispose of the dosh.
  • dunstonh
    It would depend on the circumstances. It may be a case of taking 7 years (or 3 and a bit with a partner) or it may be tax paid products like life funds which have no impact on age allowance or looking offshore if tax status suits. Or perhaps invest in low yield investments but take withdrawal of capital instead. Or reinvest each year into a stakeholder pension to either commence immediatly or delay until later.
    I am a Financial Adviser. Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
  • fraser
    I am a civil servant and on the classic scheme, been one for 3 and a half years, now I have got a new job and shall be leaving.

    assume it is better to leave the contributions and my final salary deal where it is rather than move it to something new ?

    just been working out my new contributions > from 1.5% to at least 6% tis a fair chunk of my monthly raise gone...
  • thefirs
    Assuming you're moving to another public-sector scheme (6% suggests local govt/NHS?) then check (a) that you are still eligible to enter on terms similar to the PCSPS (i.e. final salary, index linked) and (b) your final salary is likely to be higher than current pay. You will be able to transfer over your 3 years on level terms, but make sure you do so within the timescale stated by the new scheme.

    If downsizing to a job that's lower paid and is likely to remain lower paid on leaving the public sector, then leave it frozen.

    After allowing for basic rate income tax relief on the extra contributions you'd need to be earning c10,300 in the new sector to match 10,000 in the civil service because of the higher rate of contribution. Effectively a 3% boost to your pension will be achieved because of this - the CS pension would be based on the lower final value.
  • Poppy9
    Do civil servants contribute to their pensions. I thought it was a non contributory scheme whereas Local Government Officers contribute 6% of their pay and Police Officers a whopping 11%.

    If they increase the retirement age to 65 - they are talking about this for Police Officers too doesn't it affect your pension. I seem to remember from a presentation we had last year that you would get a reduced pension. Your contributions upto 1st April 2005 (only Local Govt) would be protected and then the balance would be at the reduced rate.

    Could have got it all wrong but I know there was a down side as lots of people in their 50's were panicking that they were going to worst off than they thought.

    Final point on public sector pay. Here in South Wales they are among the better paid jobs. House price inflation has though made all salaries inadequate. Also working in the public sector you get better terms and conditions and better employment protection. I speak as a Local Govt. Officer. I have friends working in the private sector, especially retail, and they get such a rough deal. Poor pay, long hours, crappy conditions and if they don't like it the threat of the sack. I have also run my own business which means working 7 days a week with no sick or holiday pay.
    ~Laugh and the world laughs with you, weep and you weep alone.~
  • fraser
    Moving back to the private sector, so am sure the transfer would not be worth it to the new scheme. My new position does attract a higher salary.

    existing civil service classic scheme = 1.5% employee contribution and then gov contributes between 12% and 16%.

    new position attracts 6% employer contribution, tis a non contributory scheme where I can just take the 6%, or add to it myself upto the allowed IR contribution limits

    presently I am tempted to just take the 6% and then invest the remainder in my isa allowance.
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