Civil Service Pension Choices

jamesperrett

BobQ wrote: »

You do not automatically get a lump sum in the current scheme or in Premium but there is the option to commute up to 25% tax free.

Not sure which scheme you are thinking of, but there is certainly a lump sum in the Classic scheme which is what we are talking about here.

BobQ

jamesperrett wrote: »

Not sure which scheme you are thinking of, but there is certainly a lump sum in the Classic scheme which is what we are talking about here.

I was referring to the comment by Boxerfan. Classic apart, existing CS pensions do not offer an automatic lumpsum. But it really does not matter as you can convert pension to lumpsum or for classic you can convert lumpsum to pension. It is just a matter of whether it makes economic sense to do so.

BoxerfanUK

BobQ wrote: »

I was referring to the comment by Boxerfan. Classic apart, existing CS pensions do not offer an automatic lumpsum. But it really does not matter as you can convert pension to lumpsum or for classic you can convert lumpsum to pension. It is just a matter of whether it makes economic sense to do so.

I think the OP's dilemma was whether to stay in Classic or opt into the new 2015 scheme as the new scheme has better accrual rates over Classic for the remainder of their service. Yes you can convert to lump sum in the new scheme but that would surely reduce the annual pension element. Classic, whilst lower accrual rates has the automatic LS without reducing annual pension which was what I was trying to point out.


I certainly would never convert lump sum to pension in Classic as the rate is abysmal.

jem16

BoxerfanUK wrote: »

I certainly would never convert lump sum to pension in Classic as the rate is abysmal.

At age 60 and including spouse pension it's around 4.83%. That's higher than an annuity would get you with the same benefits so why is it abysmal?

BoxerfanUK

Don't know what it was in percentage terms Jem, and it was some time ago that I went onto the CSP calculator, but compared to the amount of pension you lost when taking extra LS the amount of pension gained by surrendering the LS 'seemed' abysmal in terms of certain choices I had within Classic at the time.

It may well be that it compares favourably with annuities in the private sector but that wasn't what I was comparing it with, either for me or the OP on this thread who is also in Classic, but I do take your point. ;-)

BoxerfanUK

jamesperrett wrote: »

I hadn't noticed the lack of lump sum in the new scheme.

Given that Classic now allows for up to 45 years of contributions rather than 40, it looks like I will probably be better off staying with Classic as I will still be contributing to it up until 2 months before my 60th birthday.

Also, the new scheme (to be called 'Alpha') only pays dependants benefits of 37.5% of your pension, compared to 50% in Classic.

jem16

BoxerfanUK wrote: »

Don't know what it was in percentage terms Jem, and it was some time ago that I went onto the CSP calculator, but compared to the amount of pension you lost when taking extra LS the amount of pension gained by surrendering the LS 'seemed' abysmal in terms of certain choices I had within Classic at the time.

I agree that the commutation rate for converting pension to lump sum at 12:1 is dire. Wouldn't really consider that.

It may well be that it compares favourably with annuities in the private sector but that wasn't what I was comparing it with, either for me or the OP on this thread who is also in Classic, but I do take your point. ;-)

It's not a case of comparing private sector with public sector - it's comparing like with like. If you intend spending the lump sum then it's useful to have but inverse commutation would give you index-linked income with a spouse pension at a rate you would never achieve by taking the lump sum.

penwise

Classic pays an automatic lump sum and pension.
Didn't know you could convert the lump sum to pension? How and when can u do this ?
Thanks

BobQ

penwise wrote: »

Classic pays an automatic lump sum and pension.
Didn't know you could convert the lump sum to pension? How and when can u do this ?
Thanks

When you draw the pension you can ask for this option. The pensions administrator will provide a quote for what a given lump sum will buy in pension. You accept or not but once it is done it is done.

It is an option that might suit some people (eg single, healthy lots of savings, no relatives/dependents to consider).

Lyncroft

Blimey - just read through the Alpha stuff - need a lie down.