Civil Service 'Classic' Pension at 55

anotherdollar55

I've decided to cash in my chips 5 years early, i.e. when I'm 55. I'm in the old PCSPS aka Classic. I left the Civil Service in 1999.

I looked at the calculator on the Civil Service Pension Scheme website to get an idea of what the payout and reduction would be. It's a handy bit of money for me as I need it now.

Though they say it's around 5% reduction per year for taking it early, i.e. prior to age 60, it's slightly less than that it seems. I imagine the 5% is a worst case estimate. It's around 21% for me for 5 years, though I am awaiting my benefits statement / forecast from the Pensions Office.

Question: Could anybody kindly advise me on this please. The pensions year for public sector is April to April. My birthday is in March. Would I therefore be better waiting until after April 9th to 'retire' to get the extra cost of living increase (I think it's 2.4% this year)? That would be certainly worth waiting a month for if I got an extra 2.4% on my lump sum. Any comments or advice very welcome. Many thanks.

Silvertabby

The cost of living increase applies both in deferment and in payment - but there would be a slight advantage in leaving it until after April CPI is applied.

ie, leave it until after CPI is applied, and the whole of your deferred pension (including the lump sum) is increased.

Take it from your birthday, however, and the April 2.4% will only be added to your actual pension - which will have been reduced for early payment and could be reduced further if you opt for maximum commutation.

anotherdollar55

Thanks for the quick reply. Very handy to know.. I'm wondering what my extra lump sum option may be. I know there is a limit. I left the Civil Service in 1999. I'll know more in a few weeks time.

GunJack

anotherdollar55 wrote: »

Thanks for the quick reply. Very handy to know.. I'm wondering what my extra lump sum option may be. I know there is a limit. I left the Civil Service in 1999. I'll know more in a few weeks time.

Extra ls is poor value in PCSPS, the commutation rate is 12:1, i.e. give up £1 pension for £12 lump sum....really not good value..

Tom99

In the April following the 1st year of pension payment do you not get a pro-rata rise depending when your pension started?

Silvertabby

Tom99 wrote: »

In the April following the 1st year of pension payment do you not get a pro-rata rise depending when your pension started?

It would be if OP was finishing work and taking his/her pension immediately - but not, as in this case, if the pension has been deferred for more than 12 months.

Silvertabby

anotherdollar55 wrote: »

Thanks for the quick reply. Very handy to know.. I'm wondering what my extra lump sum option may be. I know there is a limit. I left the Civil Service in 1999. I'll know more in a few weeks time.

How much lump sum would you like to take?

The above links to the LGPS, but will work for the CS as they use the same commutation rate (1:12). However, as GunJack says, it's not a particularly generous exchange rate.

anotherdollar55

I'm thinking of taking an extra 12k if I can as although it's not a great exchange rate, the cash will be very very handy now and wouldn't be too drastic on my annual pension. I get the impression from the Cs pension leaflet I can ask for upto 2.25 x my annual pension as extra lump sum. I'll find out in about 10 working days they've said. To be honest I'm quite excited about it.

anotherdollar55

Thanks for the link. Very helpful indeed. ��

Dazed_and_confused

I'm thinking of taking an extra 12k if I can as although it's not a great exchange rate, the cash will be very very handy now and wouldn't be too drastic on my annual pension

Although the 12:1 rate is generally seen as poor value you need to remember that losing £1k in pension won't necessarily cost you £1k.

If your pension (or total income) is large enough for you to be paying tax on it then you might only lose £800 in real terms after taking account of the basic rate tax you would have had to pay on the £1k (possibly just £790 if you are Scottish resident ode tax purposes).

jamesperrett

It may also be worth saying that the lump sum actuarial reduction for retiring early is less than the pension reduction. It still doesn't make the rate that attractive but it may be worth thinking about. However, you would need to check exactly how the calculation is done - is the pension reduction due to the enhanced lump sum calculated before or after the actuarial reduction is taken into account?