Civil Service Added Years

Lyncroft

Hello

Has anybody any thoughts on this. I'm 51 and thinking of buying an added year worth £1,000 (lump sum x 3) to take at 60. According to the calculator it would cost approx £18,500.

Also, how does the tax relief work. Would I get back 20% by applying to HMRC and then they just refund this. Sorry, no idea about this sort of thing and time has crept up on me!

Many thanks

hugheskevi

I'm 51 and thinking of buying an added year

I think you mean Added Pension - added years ceased to be available to new purchases around 2007.

Also, how does the tax relief work.

Depends how you purchase it - if you pay via payroll it is all done automatically. If you pay by cheque you have to claim tax relief back from HMRC.

Would I get back 20% by applying to HMRC and then they just refund this.

In theory, yes. In practice many report a lot of trouble getting HMRC to understand that basic rate tax relief is not applied automatically as it is in most schemes. You will get it eventually, but it might be an irritating process.

Has anybody any thoughts on this.

At age 51 you must be close to moving from classic into alpha. Once you move into alpha you will no longer be able to purchase classic added pension so you should check your transition date if you do not know it. That may well limit your options in terms of purchasing via monthly payments compared to lump sum too.

Added pension is a pretty good option for those wanting to increase their pension in retirement. It is less good if you want to retire early. Some would argue you could get a better return than the discount rate used to calculate the Added Pension cost, but that is more relevant for younger members who would be expected to take more investment risk. You should also consider the risks of concentrating all your pension assets in one basket - your main pension is already at risk of policy change, eg RPI-CPI. But no obvious reason not to do it if you think you will need more pension in retirement.

Lyncroft

Thanks for the reply. Yes, sorry, I didn't put enough info. You're right I'd be buying added pension worth £1k a year which would also give me an added lump sum under classic of £3k (I think)

I'm moving to Alpha Dec 1st so that's why I'm looking into it now. I'd be purchasing via a lump sum. I'm pretty risk adverse so it seems a decent idea.

Thanks again for replying.

atush

Do you want to retire early? this is the biggest factor and you didnt answer

Lyncroft

Thanks for the reply Atush.

I had considered trying to retire early but don't think it's manageable so I was looking at going hopefully at 60.

At the moment I've quite a big lump sum of money which I need to use as best I can. I still rent so I've got some thinking to do. Live in London unfortunately.

I haven't ruled anything out (I could always move somewhere cheap).

From your question what are the implications?

greenglide

I was looking at going hopefully at 60.

These days, even in civil service, 60 does count as early.

The alpha scheme has a normal retirement age equal to your State Pension age but this can be taken early with actuarial reduction or the employer can enhance it in case of redundancy.

Does anyone in the civil service actually work up to NPA for their scheme and retire without taking redudancy?

OldBeanz

I resigned before my NSP age without redundancy - some departments can only save money by getting rid of staff others can just shuffle spending about the place.
If paying by lump sum then indeed the IR will write back to you without returning any tax paid thinking it is a 40% tax issue and adjust your tax code. You then write and explain in words of one syllable.
You are limited to the amount of tax you have paid so you need to be earning £30k + and have the normal allowances to ensure you get all the tax back on a sum of £18k or split the amount over two years.

Thrugelmir

greenglide wrote: »

Does anyone in the civil service actually work up to NPA for their scheme and retire without taking redudancy?

Plenty do. Increasing numbers here have opted to reduce their working hours as NRA approaches.

GunJack

greenglide wrote: »

These days, even in civil service, 60 does count as early.
Does anyone in the civil service actually work up to NPA for their scheme and retire without taking redudancy?

Here, a lot of people have gone beyond 60 even though they were all in classic, and another lot have retired at NPA (60) on the friday and then come back part-time on the monday...remains to be seen what happens when the remainder are transferred to alpha...

Lyncroft

OldBeanz wrote: »

I resigned before my NSP age without redundancy - some departments can only save money by getting rid of staff others can just shuffle spending about the place.
If paying by lump sum then indeed the IR will write back to you without returning any tax paid thinking it is a 40% tax issue and adjust your tax code. You then write and explain in words of one syllable.
You are limited to the amount of tax you have paid so you need to be earning £30k + and have the normal allowances to ensure you get all the tax back on a sum of £18k or split the amount over two years.

Thanks - do you know how long it takes to process? Do they let you know before drawing the money. Don't really want 18k sitting in a low interest account for too long?

atush

Lyncroft wrote: »

Thanks for the reply Atush.

I had considered trying to retire early but don't think it's manageable so I was looking at going hopefully at 60.

At the moment I've quite a big lump sum of money which I need to use as best I can. I still rent so I've got some thinking to do. Live in London unfortunately.

I haven't ruled anything out (I could always move somewhere cheap).

From your question what are the implications?

AFAIK, your retiremant age is not 60, but 65. Which could mean a reductions of up to 5% a year (ie 25% for 5 years).

So buying added pension, for it to be reduced is silly.

Far better to pay into a DC scheme and take that one to live on until your pension pays out in full, w/o reduction.

No I dont know how much of this applies to you, but i'd find out before making any decision?