Civil Service pension commute advice please

a&akay

I've just received my Partial Retirement quote from MyCSP on going down from 5 to 3 days a week. In rough figures I can commute at 12:1 my £9.5k of annual pension at maximum to a £40k lump sum, leaving £6.1k per year. I'm a 40% taxpayer both now and also after partial retirement. The 'premium pension scheme' booklet example at page 7 is a pretty good match and says the lump sum is tax free whereas the £9.5k will be effectively taxed at 40% until full retirement when it will be 20%. Bearing in mind Brexit and possible changes in tax rates/allowances my thoughts are to take the lump sum. My wife has never worked and can get roughly 3% interest on the £40k.

AnotherJoe

Why not simply delay your CSP pension until full retirement? Or is that not allowed?

Andy_L

Your wife can get 3% tax free, you can get 8.3% (1/12) by not commuting it. Even at 40% tax that's still a better return.

Andy_L

AnotherJoe wrote: »

Why not simply delay your CSP pension until full retirement? Or is that not allowed?

Looks like the OP is in the old Classic Scheme in which case, IIRC, there's minimal benefit to not taking it as soon as you hit NRA (as it doesn't increase by deferring it like, eg, the state pension does)

kidmugsy

Why not take the bigger pension and avoid 40% tax by making contributions to a personal pension of some kind? Also make pension contributions for your wife.

a&akay

Thanks all for the replies. The intention is to maximise our weekend-break options whilst we, at 65, are still capable of taking advantage of out-of-school holiday costs, including flight and hire car, of all the european cities. On a flexi hours agreement I can pick my time off, even part time. I'll number crunch over the next few days and get back.