Civil Service Pension: Annual Pensions Increase factors. What are they?

Pyxis

I am claiming my Civil Service Pension for the first time. I have to decide whether to take the lump sum as a lump sum, or convert it to extra pension income. The current value of the pension is £3100 pa plus lump sum of £8600.
I understand that if I convert the lump sum to income, the calculations are done on the original 'basic' pension, which was £900 pa and lump sum £2700.
The income releasable from the lump sum is £4.87 (female) for every £100 of ''basic" lump sum, ie £4.87 x 27, per annum. However the resultant figure is then 'brought up to date using the Annual Pensions Increase factors.'
Does anyone know what these factors are? I rang Capita 8 days ago, who referred me to MyCSP, who said they would have to get my pension figures from Capita and would be in touch. Today I got a call from MyCSP to say that only Capita have these figures!!! And I would have to contact them!!
I need to know what the extra income would be in order to make the really important decision of whether to take the lump sum or have extra income.
Can anybody tell me what these factors are?

xylophone

http://csp.hartlinkonline.co.uk/faqsadminclassic.html

might be of interest.

Pyxis

Thanks for the link. Unfortunately, it does not give the Pensions Increase factor figure. The information it does give is the information I already have, ie as outlined in my original post.
I am dreading having to try to get this information from Capita; MyCSP said that Capita always refer people to them, when it is Capita that have the figures. I have already gone round in one big circle.
Unless I know exactly what extra annual pension would be generated by giving up the lump sum, I cannot make an informed decision as to what to do.
O me miserum!

xylophone

It says

Q4. How and when is my pension increased?

A. Pensions in payment are increased annually in line with the cost of living based on factors provided by HM Treasury in April of each year. These increases are paid to all pensioners aged 55 or over or receiving an ill-health or a dependant’s pension.

The increase you receive depends on the date on which your pension began. If your pension starts on or after the date of the HM Treasury’s review order in the previous year you may receive a lower percentage.

Your first pension payment after the date of the HM Treasury’s review order will only include the increase for the period after that date. In subsequent payments the whole month will be paid at the increased rate.

Where a pension includes a Guaranteed Minimum Pension (GMP) part of the increase will be paid by the Government with your State pension. This will not affect the total amount of pensions increase you will receive. (See reference to GMP below)"



For the year 2013-14 http://csp.hartlinkonline.co.uk/pensioners.htm

"For the year beginning 8 April 2013 the increase is 2.2%, based on the increase in the CPI."

As to 2014-15, probably 2.7% like the LGPS?

http://mpfmembers.org.uk/pdf/hp11.pdf

"It is expected that local government pensions will increase in April 2014 in line with September’s inflation figure of 2.7%, as measured by theConsumer Prices Index (CPI) – the government’s method for increasing public sector pensions".

sleepless_saver

Pyxis wrote: »

I understand that if I convert the lump sum to income, the calculations are done on the original 'basic' pension, which was £900 pa and lump sum £2700.

What is this original "basic" pension? Is it the value at the time you left civil service employment and are you looking for the increases from then up till now? Or is it current increases?

If the former then I think this is what you need. http://webarchive.nationalarchives.gov.uk/20130129110402/http://www.hm-treasury.gov.uk/tax_pensions_increases_archive.htm

mjm3346

Taking your figures you would add approx £130 to your original pension, using the £900 becomes £3100 to give your increase factor the £130 becomes approx £440 to add to your £3100. If you just take the current lump sum and convert it's around a £420 increase.

The pension increases are generally RPI before switching to CPI from April 2011 (there was no increase for 2010), so you could work it out fairly accurately if you wanted.

xylophone

Is the situation that when you left the Civil Service, your statement showed

£900 pa and lump sum £2700?

Does this not mean that your updated pension is

£3100 pa plus lump sum of £8600.

?

So you would be considering inverse commutation of £8600?

http://www.civilservice.gov.uk/wp-content/uploads/2012/07/Table-42-Inverse-Commutation-classic.pdf

£418.82 per annum? So that if you did not take any lump sum your annual pension would be £3518.82 uprated annually as in the first link?

Have you actually asked Capita for the figure for the amount of your annual pension if you commuted the whole of the updated lump sum?

Annie1960

Hi Pyxis

I'm having difficulty understanding exactly what you are asking.

I retired from the PCSPS 3 years ago, and did an inverse commutation. I saw an Independent Financial Adviser (IFA), as it's a really important decision, and I would certainly not rely on CAPITA for advice on this.

The issues for me were:

I did not particularly want the lump sum, as I have a range of other savings and investments. If you want the lump sum to pay off mortgage, other loans, buy a car or have a holiday then consider taking it as it is tax free.

If you don't want the lump sum, then an inverse commutation is a 'no-brainer'. I hate that term usually, but it does apply in this case. Are you saying that the exchange rate for you would be £4.87 per £100? (It varies according to age and sex). If the answer to this is 'yes', then you will effectively be getting 4.87% on your lump sum. I do not know of any other savings or investments that pay anything like this amount, so it's a good deal. In addition, each year you will get an increase for inflation (at the moment the increase is based on the CPI rate in the previous September, so it will vary each year). You will, of course, pay tax at your usual rate on the income, but it's still a good deal if you don't want the lump sum.


I really suggest you get advice from an IFA as you may have circumstances that make your decision different from mine, but I have tried to summarise the main issues pointed out to me by the IFA I saw.

Do you have a date by which you have to make the decision?

Pyxis

Sorry if I wasn't clear.
I left the Civil Service in 1981. At that time I was told my pension would be £900 pa and a lump sum of £2700. (They called this my 'basic pension') A month ago I decided to claim my pension as I am now over 60. I then got a letter saying that my pension is now £3100 pa and a lump sum of £8600, which I can surrender to get extra pension income. The extra pension I could get is worked out by applying the multiplier of £4.87 (as I am a female) to every £100 of 'basic pension' lump sum I give up. This results in a figure of £131 extra pa, which when added to the 'basic pension' of £900, gives a new 'basic pension' of £1031 pa. BUT THEY THEN SAY: "the new basic pension would then be brought up to date using the most recent Annual Pensions Increase factors".
It is these factors that I need, in order to ascertain what my actual annual pension would be, if I surrendered the lump sum.
Until I can work out what the actual annual pension would be, I can't know if it would be a good thing to do.
I did ask Capita, and they referred me to MyCSP who have today referred me back to Capita. Hence my misery.
If the factor to be used is just the most recent inflation figure for the last 12 months, then that misses out the previous 32 years. On the other hand, if the factor is the same as the ratio between the 'basic pension' and the current value of the pension, then why use the formula with the £4.87 etc.?
I just need this last elusive number. (Perhaps it is 42.) (I am despairing of Life, The Universe and Everything.)

mjm3346

If the factor to be used is just the most recent inflation figure for the last 12 months

It is not just the most recent figure it is the one for each year since you left (RPI then CPI as per my previous post), unless it matters to the exact £, I would say the extra pension will be around £440 per month using the "factor*" or at worst the £420 you would get using todays new lump sum figure. (I assume you are just 60 and have not left it a while to claim)

thename

The Annual Pensions Increase Factors are in tables released by HM Treasury every year. The 2014 table can be viewed or downloaded from the gov.uk website by doing a search on 'pensions increase' and selecting Public Service Pensions Increase: 2014 on the resulting page. (Sorry this system won't let me put in a link because I'm 'new'!) The table is an MS Excel file so you will need the appropriate software to read it.

The factors change slightly from month to month (by about 0.03) so you need to select the row in which your last day of service occured, eg the factor for the period 08/06/81 to 07/07/81 is 3.5152.