Civil Service Pension Annual Increases

Acquinas

I think this one is going to need input from a real civil service pensions wonk. I thought that I was one, but apparently not.

I left the service last year aged 53 and deferred my Classic benefits. I have just applied for the pension to become payable in a couple of months time, i.e. about 6 months before my 55th birthday.

The letter of entitlement explains that because I am taking my pension early it will be subject to an actuarial reduction. Fair enough, I expected that. But it also explains that because I am taking it before I am 55 (just) that I am not entitled to any annual "cost of living" upratings since I left. So, essentially, it looks as if I will be getting an actuarial reduction "frozen" at 2015 rates. It's possibly not a huge amount - maybe a reduction of £400 annually overall - but it does take me just south of my target number.

Question 1: if I take these pension benefits now will these foregone increases be lost forever, or will there be a "catch up" when I reach 55?

The letter also explains that a proportion of these increases may become payable if I have dependent children under age 23. Well, I have 1 child aged 17 still at school and another at university aged 21, both of whom I am supporting.

Question 2: can I "qualify" for these increases on the basis that I (may) have dependant children?

The MyCSP site is normally pretty good in terms of leaflets and FAQs, but I can't find anything on this at all.

Thanks.

p00hsticks

Acquinas wrote: »

The MyCSP site is normally pretty good in terms of leaflets and FAQs, but I can't find anything on this at all.

Have you tried asking them ? I had cause to e-mail them recently with a couple of queries and they responded very promptly (an inital acknowledgement by return and then an answer to the first question within a day or two and the second within a week).

jerrysimon

My understanding is that civil service pension (I am in classic) taken before 55 (i.e. between 50-55) do not get annual increases up to 55, after that they become payable.

Re dependents I think that is when you die i.e. if its a spouse/partner getting your pension then any children would also get an additional payment over and above the 50% the spouse is entitled to.

Probably best ask them fro clarification. Can't you delay it another 6 months ?

Jerry.

Acquinas

Yes thanks. I have emailed them and received an acknowledgement. I think if push comes to shove I may have to defer a little longer, though I did have plans for this this summer which may now have to be put back.

I hear what you say about dependants and agree that "death benefits" is usually the context in which the matter comes up. But here it is in my letter fully in the context of increases to pension payable before age 55.

moo121

Hi as someone who took my actuarially reduced deferred pension last year, my understanding was that it "caught up" at 55.


My pension was deferred in 2012 and brought into payment in 2016. The MyCSP calculations showed the deferred pension at the 2012 level and then the actuarially reduced amount which is now in payment. I now have a further 3 years to wait until any increases but I expect all CPI increases since last year to be applied then.


Quick snippet from an old pensions manual I once found on the web but can't find again (circa 2006):


Payment of benefits before age 55

2.3.8 The actuarially reduced pension and lump sum which are payable immediately are based on the preserved pension and lump sum before the addition of any pensions increase.


2.3.9 The benefits are put into payment without the addition of any pensions increase.

2.3.10 When the person qualifies for pensions increase (normally at age 55):

• the actuarially reduced pension is multiplied by the pensions increase (PI) multiplier for the period from the beginning date of the pension to the date when the member reached age 55. The revised pension is put into payment; and

• the actuarially reduced lump sum is increased retrospectively by the amount of pensions increase which had accrued from the beginning date to the date when the lump sum became payable. The increase in the lump sum is paid.

The usual caveats apply - please don't make decisions on your pension based on what someone on the web says, contact MyCSP as you have done and get the official line.

Acquinas

Just waiting for the budget, with my finger hovering over the "send" button in case HMG decide to move the goalposts again. Though, to be fair, with all the horrors of Brexit detail looming, Mrs May have decided that it may be time for an armistice in the long war against the public sector.

Acquinas

For the record, MyCSP got back to me today. Bottom line is that, all things being equal, there is a "catch up" once age 55 is attained. More curious is the possibility that I may get the increases anyway if I can prove that both of my kids are still in education. So I've got to dig our their birth certs and something from the institutions they attend in order to see if I can get a new quote.

Silvertabby

For the record, MyCSP got back to me today. Bottom line is that, all things being equal, there is a "catch up" once age 55 is attained. More curious is the possibility that I may get the increases anyway if I can prove that both of my kids are still in education. So I've got to dig our their birth certs and something from the institutions they attend in order to see if I can get a new quote.

Are sure you're not talking about death benefits? ie, if you took your pension from age 50 it wouldn't be index linked until 55 - BUT if you died before 55 then any spouse/childrens pensions would be index linked from the start.

Annie1960

I took early retirement on a Classic pension aged 51. I got no increases until I reached 55, when all the CPI increases for 4 years were added together for one big increase.

Vidyasagar

A slightly different question.

Do the index linked pension increases at age 55 only kick in if you draw your pension at 55 or will they also accrue into a deferred classic pension after age 55. I am in the situation where my classic ends 6 months before i reach 55. To benefit from the index linking to the deferred classic should i just let it carry on into Alpha and get the CPI raises applied to it automatically after age 55. I plan to retire at 62.

After reading through the classic scheme rules it vaguely mentions this hence asking.

jamesperrett

If you just switch to Alpha when the time comes, the Classic part of your pension will be determined by the best year of your last 3 years at the point you retire. If you believe that civil service salaries won't keep pace with inflation over the next 5 years then it may be worth your while opting out of the Classic pension for at least 28 days and before the switch to Alpha. This will mean that your Classic benefits built up so far will become deferred and will then be revalued each year by CPI. However, if you are expecting a promotion or other additional pensionable benefits in the next few years, then you may want to carry on as normal.