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Civil Service Pension

Can you draw down against a lump sum of a civil service pension of 40years?
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Comments

  • marlot
    marlot Posts: 4,962 Forumite
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    Surely the lump sum is tax free, so you take it and can invest it elsewhere - so can spand it whenever you like?


    Or are you wanting to access the lump sum ahead of retiring?
  • lotto
    lotto Posts: 102 Forumite
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    Yes, I would like to take the money out ahead of retirement.
  • xylophone
    xylophone Posts: 45,578 Forumite
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    You are currently still working for the Civil Service?

    You have chosen not to bring your DB pension into payment at Scheme Normal Retirement Age (presumably age 60)?
  • lotto
    lotto Posts: 102 Forumite
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    Just want to pay what’s left of the mortgage
  • lotto
    lotto Posts: 102 Forumite
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    No, sorry entries crossed
  • lotto
    lotto Posts: 102 Forumite
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    Still working...age 58
  • Brynsam
    Brynsam Posts: 3,643 Forumite
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    No. No option to drawdown (nor can you transfer your CS pension to a DC arrangement).
  • marlot
    marlot Posts: 4,962 Forumite
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    Unless you want to retire early (or partially retire), the best option is probably to extend the mortgage until retirement date.
  • jamesperrett
    jamesperrett Posts: 1,009 Forumite
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    At age 58 you'll lose nearly 5% on your pension for each year you retire before 60. However, you'll lose less on the lump sum as the actuarial reduction rates are different for the pension and lump sum. The pension will also increase with inflation which is likely to be higher than civil service wage increases over the next couple of years.

    I'd still suggest not taking the pension early unless you are on a high mortgage rate and can't move to a lower rate for some reason.
  • Suffolk_lass
    Suffolk_lass Posts: 10,171 Forumite
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    You could explore partial retirement ahead of your normal pension age. This would permit you to take an actuarially reduced lump sum (typical examples are 5% for each year you take it early) and some of your (similarly reduced) pension income, and reduce your working time by the proportion of your pension that you take.

    e.g. take 40% lump sum and 40% of your accrued pension income (which is exempt from NI contributions), reduced by 10%. You then reduce to 60% of your working week. Your pension would reduce by 40% of your earned benefits (so 28 years left out of 40 in the example used) and you would accrue additional pension at 60% of your normal accrual rate.

    There are lots of things for you to consider, including how much you would save in mortgage payments, if that is your key driver.

    When doing the calculations (there is a calculator on the CS Pensions web pages - different for each scheme) remember you cannot be better off in income terms than you are now - so if you work too much - you do so for nothing (known as Abatement). Here is a link to a calculator

    Abatement might still work for you if your employer will accept this but not a shorter working week. Your Management would need to agree that your job can be adapted (and they can absorb this) - at our place this generally excludes people working shifts.

    It sounds counter intuitive to do this but lots of under 60s have done this (especially people with financial overheads who started before they were 20).
    Save £12k in 2025 #2 I am at £4863.32 out of £6000 after May (81.05%)
    OS Grocery Challenge in 2025 I am at £1286.68/£3000 or 42.89% of my annual spend so far
    I also Reverse Meal Plan on that thread and grow much of our own premium price fruit and veg, joining in on the Grow your own thread
    My new diary is here
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