CS Pension

ttossi

Help,
I have a number of small pensions pots and have started to consider amalgamating them.
One of the pots is worth 16k, after transferring to the Civil Service I have been offered a £1,454.52 per annum with 545.41 widower pension if i die from age 67 (age now 50). It seems a fantastic offer but I dont know where to start to work it out (ideally for myself)

Help - advice please .

jerrysimon

Is that an overall figure or based on the pension transferred in ?

How many years do you have already in the CS pension scheme and which one are you in Classic ?

In am in the CS and in my case I have to add in about 20K for every 1K/year of pension. This is not good value as far as I am concerned though as I now have 39 years there is no point.

As I am in Classic its payable from 60 which is probably why yours is higher for less given you have to wait till 67. That gives them 17 years to sit on your 16K (though I dont think it goes into any pot) unless you draw it early (probably reduced) or you die and your wife can then draw it.

Jerry

Linton

Lets say you invest the £16K at 5% above inflation average return.

When you are 67 it will be worth £16K X 1.05^17=£36672 in current value
Now you drawdown at say 4% = £36672 X 0.04 = £1467/yr. Roughly the same as the CS pension. Some would argue that 4% is a bit ambitious, others that with care it could be safely exceeded.

So taking the CS pension option for no risk or effort at all you get something which you may (though not guaranteed) be able to achieve with careful investing.

Some factors to consider
1) Is the £16K the only money you would be investing? If so it would seem hardly worth the effort of DIY.
2) Do you plan to retire early or will you need cash at some stage, eg to pay off mortgage? If so it may be useful to build up pension money outside the CS pension.
3) In a drawdown SIPP when you die your spouse would get all of the £16K remaining, which may be better than the CS spouse pension.