Civil Service Pension - leaving early

Jennie5

I am going around in circles on the CSP website, so hoping someone can help me please!

I am in the Classic scheme and am looking to retire at the age of 59yrs 2mths. I understand if I take my pension at that age I will incur a 5% reduction in my pension. What I am trying to understand is, is that just for that 1 year until I reach 60, or is it forever, so every year it will reduce by 5%? which doesn’t sound right to me!

I think I am confusing myself, but this is what the guidance says “You can apply to MyCSP to have your pension paid early on a reduced basis at any time after reaching age 50 (55 if you joined the Civil Service on or after 6 April 2006). You should note that your benefits will be reduced permanently by around 5% for each year before scheme pension age.This reduction does not end when you reach scheme pension age. The amount of pension, after reduction, must be enough to cover the amount of any guaranteed minimum pension we have to pay you at State pension age. This requirement may limit how early you can draw your pension.”

Grateful if anyone can clarify what this means please!

Andy_L

It is one-off 5% reduction in your pension that lasts forever

Ie for every £100 of annual pension you would have got at 60 you will now only get £95 per year instead

hugheskevi

I am in the Classic scheme and am looking to retire at the age of 59yrs 2mths. I understand if I take my pension at that age I will incur a 5% reduction in my pension.

You can calculate the exact figure using this calculator.

I think the reduction to your pension will be 3.9%. Your lump sum will also be reduced, by about 2.6%.

It is very unlikely the limit mentioned about Guaranteed Minimum Pension in the text you quote in your opening post will be relevant for you.

Rest as Andy L says above.

Jennie5

Thanks both for the clarification.

If I left in May this year but didn’t take my pension until I reach 60 in March 2020, I assume my pension would be frozen in May (when I leave,) so then I wouldn’t have to pay the 5%?

hugheskevi

If I left in May this year but didn’t take my pension until I reach 60 in March 2020, I assume my pension would be frozen in May (when I leave,) so then I wouldn’t have to pay the 5%?

Your pension would be calculated based on your years of service and final pay when you left service in May.

Your pension would then be increased by CPI until you drew it at age 60.

As you would be receiving the pension at normal pension age there would not be any reduction.

Tom99

hugheskevi wrote: »

Your pension would be calculated based on your years of service and final pay when you left service in May.
Your pension would then be increased by CPI until you drew it at age 60.
As you would be receiving the pension at normal pension age there would not be any reduction.

I don't think there would be any CPI increase because the leaving date May 2019 and pension start date Mar 2020 are within the same Civil Service pension year of April to April.

Jennie5

Thank you all for your advice, at least I now know the reduction is for the life of my pension, it’s not what I wanted to hear but does help me try and work through the different options I have.

I am looking to take a voluntary exit package, so need to look at all options available, including buying a added year, but this option seems to cost a lot, though appreciate it is long term.

Out of curiosity does anyone else have problems accessing the calculators on Apple devices, as I can’t use them at all.

I appreciate any advice/thoughts you may have, as I must admit the more I read the more questions I have!

jerrysimon

I retired nealry two years ago aged 56 with 39 years of public service. At the time I was waiting for some kind of redundancy as well, but missed three rounds of it, before I finally gave up and just resigned. You can never wind the clock backwards and retire early, if you leave it till later. I appreciate it depends on the amount of pension you get and if it is sufficient to give you the lifestyle you require in retirement though.

One thing that I considered in my calculations was how long it would have taken to recover the lost pension (taken earlier) if I stayed on. For me I would have had to have been retired for 8 years at the higher rate to get back the pension I will now get in the four years to 60. This takes into account the higher full salary for those four years and paying an additional £600 a month in Pension and NI deductions, which I no longer pay. I did not work out tax differences which of course I also pay less of now.

Just another way to look at it. I have two new grandchildren aged 2 1/2 and 8 months and could never get back the extra time I have had with them these last two years.


Of course I know we all have different motives and reasons to retire early or not. Money is not always a factor and there are a few people at my old workplace that have chosen to continue to work to 65 and one even to 70 (and still there) having gone way past their 40 years service.

Jennie5

I agree there are alot of things to consider. I now have a chance to take a exit package, though £9,000 has already been taken off as I went part time in the last three years! But I know this is my last chance to come away after 32 yrs of service with a little extra, plus I doubt I would get that chance again as I will be 60 next year.
Plus the thought of not having to race down the motorway at 6:30 anymore makes it even more worthwhile!

Kynthia

Jennie5 wrote: »

I agree there are alot of things to consider. I now have a chance to take a exit package, though £9,000 has already been taken off as I went part time in the last three years! But I know this is my last chance to come away after 32 yrs of service with a little extra, plus I doubt I would get that chance again as I will be 60 next year.
Plus the thought of not having to race down the motorway at 6:30 anymore makes it even more worthwhile!

If you take an actuarial reduction it's a one-off permanent amount. So say you were going to get a pension of £20,000 a year at 60 and increased by CPI each year but had a reduction of 4% for taking it a year early, you would instead get £19,200 a year which would be then increased annually by CPI.

Is it definite that your redundancy package has been reduced by £9k due to going part time, or is that a figure you've estimated yourself? Redundancy payments, like your pension, are usually calculated using your reckonable service multiplied by a salary figure. So going part time for just a few years when you've had a long service would usually only affect the amount by a small percentage, and considering you probably already exceed the 21 month cap then I thought that would mean it had no effect on your compensation amount. However someone else may confirm otherwise.

Jennie5

Kynthia wrote: »

If you take an actuarial reduction it's a one-off permanent amount. So say you were going to get a pension of £20,000 a year at 60 and increased by CPI each year but had a reduction of 4% for taking it a year early, you would instead get £19,200 a year which would be then increased annually by CPI.

Is it definite that your redundancy package has been reduced by £9k due to going part time, or is that a figure you've estimated yourself? Redundancy payments, like your pension, are usually calculated using your reckonable service multiplied by a salary figure. So going part time for just a few years when you've had a long service would usually only affect the amount by a small percentage, and considering you probably already exceed the 21 month cap then I thought that would mean it had no effect on your compensation amount. However someone else may confirm otherwise.

I used the compensation calculator and it asks whether you have worked PT in the last 3 yrs which I have, ( though I have worked FT for 29 yrs and PT for only 4 yrs), it shows the compensation based on FT & PT. Also I understand the nearer you are to pension age, the less compensation you get?
Also the Compensation scheme being offered where I work is based on 3 weeks pay per year of continuous service up to a maximum of 18 mths so is slightly less to the one on the CSP website.