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

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  • Pyxis
    Pyxis Posts: 46,077 Forumite
    Ninth Anniversary 10,000 Posts Name Dropper Photogenic
    Thank you thank you thank you!
    It would seem that that last link to 'Public Service Pension increase 2014' is the right one, as it mentions 'multiplier applied to the basic pension and lump sum' for a pension applied for after 7th April 2014. ( A similar link was posted by a previous responder, but only applied to 2011, so I wasn't sure if that was the correct one I should use; in fact, the multiplier in 2011 was different from the one for 2014).

    Anyway, as I left the Service on 16/5/81, it seems that the Factor to be applied to my 'new basic pension' of £1031pa is 3.5406, which would give me an up-to-date annual pension of £3649 if I give up all my lump sum.
    Now that I have that information, I can make an informed decision as to what to do. It does beg the question why this information couldn't be given out in the letter telling me about my pension!
    A big thank you to everyone trying to help - your time spent is very much appreciated. I might have lunch at the Restaurant at the End of the Universe today, to celebrate!
    (I just lurve spiders!)
    INFJ(Turbulent).

    Her Greenliness Baroness Pyxis of the Alphabetty, Pinnacle of Peadom and Official Brainbox
    Founder Member: 'WIMPS ANONYMOUS' and 'VICTIMS of the RANDOM HEDGEHOG'
    I'm in a clique! It's a clique of one! It's a unique clique!
    I love :eek:



  • amandajc
    amandajc Posts: 217 Forumite
    This thread has been very useful to me too as I also have an old, small, Civil Service pension that I am wondering what to do with when I get to 60 in 5 years time. Thanks all.

    I am currently saving and investing hard to in the hope that I will be able to pull together enough resources to fund early retirement at 60 and defer my LGPS pension to NRA at 66. This small pension should help me a little along the way.

    I suppose that the decision as to whether to take my Civil Service lump sum (around £2000) or commute it to increase the yearly pension (to somewhere around £800 pa) is also affected by the tax implications. The lump sum is tax free and could be added into my S&S ISA but the increase in pension will become taxable once I am receipt of my full pension and state pension at 66, but then on the other hand it will increase with CPI. What to do??

    There's only a small amount involved but after a lifetime of just letting the finances take care of themselves and probably losing a lot of potential benefit in the process, I'm trying to start making informed decisions.
  • OldBeanz
    OldBeanz Posts: 1,436 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    If you intend giving up work at 60 and will have no income until 66 then you are wasting 6 annual allowances. If you pay the maximum into a stand alone pension up until 60 then you could accumulate 6 years times £10.5k plus 25% TFLS = circa £79k.
    So unlike an ISA you can get tax relief on the way in and like an ISA no tax on the way out. The new pension plans are greatly to your advantage as in the past there was no pension product which could have easily filled this void.
  • amandajc
    amandajc Posts: 217 Forumite
    Thank Oldbeanz. I started a Sipp with Fidelity a couple of weeks ago and do have a long standing FAVC with CIS which, since the new rules, I'll hopefully be able to start drawing at 60. I don't think I be far off funding myself to the annual tax allowance limit for the 6 years with all these combined (fingers crossed - it does depend on what life hits me with between now and then) so I also need to build up savings in the the ISA which I can take untaxed to supplement the pension income. It might be a bit touch and go but I really don't want to stay at work past 60 if I can help it.
  • mjm3346
    mjm3346 Posts: 47,268 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Annie1960 wrote: »
    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). ?

    Not quite that simple, as the lump sum is lost forever it does not really compare to an interest rate, depending on tax/interest rates/cpi and what is done with the lump sum it can be 15 to 20 years or more before the lost lump sum is recovered through extra pension.
  • Pyxis
    Pyxis Posts: 46,077 Forumite
    Ninth Anniversary 10,000 Posts Name Dropper Photogenic
    edited 16 April 2014 at 11:26AM
    Yes, I agree, it's not that simple, when the period involved is 15-20 years.
    You get a high 'rate of interest'-equivalent with the extra pension, but you've lost the lump sum, whereas investing the lump sum may give a lower rate of interest, but you've still got the lump sum at the end of it, ( albeit eroded by inflation).
    I have a Fidelity portfolio from which I draw down on the capital, to give me a monthly income. It has performed very well in the last 4 years, my total investment having increased despite the monthly withdrawals. Perhaps I would be better off adding my lump sum to this portfolio?
    But then the pension is index-linked, and so relatively inflation-proof. But tax is paid on the pension income. With the withdrawals from capital with Fidelity, this isn't income, so isn't taxed, and you only pay CGT if you go over the CGT allowance for the tax year. Similarly, if you put the lump sum into an Isa, the income from that is tax-free.
    It really is a quagmire!
    Decisions, decisions. It's so difficult, and like amandajc I really don't want to make the wrong choice.
    (I just lurve spiders!)
    INFJ(Turbulent).

    Her Greenliness Baroness Pyxis of the Alphabetty, Pinnacle of Peadom and Official Brainbox
    Founder Member: 'WIMPS ANONYMOUS' and 'VICTIMS of the RANDOM HEDGEHOG'
    I'm in a clique! It's a clique of one! It's a unique clique!
    I love :eek:



  • BobQ
    BobQ Posts: 11,181 Forumite
    Ninth Anniversary 10,000 Posts Name Dropper Combo Breaker
    Few people are capable of expressing with equanimity opinions which differ from the prejudices of their social environment. Most people are incapable of forming such opinions.
  • Annie1960
    Annie1960 Posts: 3,009 Forumite
    Tenth Anniversary 1,000 Posts Name Dropper Combo Breaker
    Pyxis wrote: »
    T

    Anyway, as I left the Service on 16/5/81, it seems that the Factor to be applied to my 'new basic pension' of £1031pa is 3.5406, which would give me an up-to-date annual pension of £3649 if I give up all my lump sum.
    Now that I have that information, I can make an informed decision as to what to do. It does beg the question why this information couldn't be given out in the letter telling me about my pension!
    A big thank you to everyone trying to help - your time spent is very much appreciated. I might have lunch at the Restaurant at the End of the Universe today, to celebrate!


    Glad you sorted it out. So long, and thanks for all the fish.
    Now, I think all of Douglas Adams' books have been mentioned in this thread.
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