Civil Service - Partial Retirement Question

mapleoak

Hi

In 2 years (when I will be 58) I will have completed 40 years in the Civil Service so effectively have my "full" pension - most of which is in "Classic". I am told that one option is to consider partial retirement and as part of that, it is important that my salary should be at least 20% less than what I will be on to avoid "abatement" although I don't really understand what that is to be honest. By doing so and then including what my annual CS pension would be, I would not necessarily be significantly worse off - or so people tell me.

Using the MyCSP partial retirement calculator I get the following - this is based on me earning £50,000 and going down to 3 days - so 60% of what I will have been on.

I am just interested in knowing if I have calculated it correctly.

If I was to take the maximum lump sum I would get around £110,000 with an annual pension of £16,500.

Or if I was to take my "standard" lump sum of £63,000 I would get an annual pension of £20,400.

So with 3 days pensionable salary at £28,000 per annum that would give me a "new" annual salary of £44,500 being the 3 days plus annual pension (max lump sum) or £48,500 (basic lump sum).

Does this seem about right or am I missing something?

Regards

BoxerfanUK

Looks ok to me. In simple terms 'abatement' means that if your new part time earnings combined with your pension earnings exceeds the earnings you were on BEFORE you took partial retirement then a proportion of your pension will be reduced (abated) to bring the combined total down to the original earnings figure before you took partial retirement.


Basically you can't retire, draw your pension and then go back to work in the Civil Service earning more than you was on before whether that be full or part time.

hugheskevi

In 2 years (when I will be 58) I will have completed 40 years in the Civil Service so effectively have my "full" pension - most of which is in "Classic".

There is no significance at all to 40 years, the maximum number of qualifying years in classic is 45 and there is no limit on alpha pension accrual. Hence 40 years is not a 'full' pension.

I am told that one option is to consider partial retirement

Partial retirement is an option at any point, including right now. There is no relevance to considering it only after 40 years of service.

it is important that my salary should be at least 20% less than what I will be on to avoid "abatement"

The requirement to be eligible to take partial retirement is that your salary reduces by at least 20%. This does not avoid abatement.

although I don't really understand what that is [abatement] to be honest

If you take partial retirement, you cannot receive more from your combined pension and post-partial retirement salary than the amount of your salary prior to taking partial retirement.

If you would receive more from your pension and salary, then your pension is abated (ie reduced) such that the combined pension plus salary is equal to your pre-partial retirement income.

If I was to take the maximum lump sum

With a 12:1 commutation rate, taking the maximum lump sum is unlikely to be a good decision unless there are particular reasons this would be a good choice for you.

this is based on me earning £50,000 and going down to 3 days - so 60% of what I will have been on...So with 3 days pensionable salary at £28,000 per annum

£28,000 is less than 60% of £50,000.

So with 3 days pensionable salary at £28,000 per annum that would give me a "new" annual salary of £44,500...

Your pension income is not salary. This can be important, eg, for working out maximum earnings on which pension tax relief can be paid, working out National Insurance contributions (pension income does not have any National Insurance deductions) and so forth.

Does this seem about right or am I missing something?

It is about right, but there is no reason to only be considering it after 40 years of service - nothing at all happens at that point (except psychological considerations perhaps), so the consideration of partial retirement is valid at all points between now and age 60.

Note that at age 60 if you are still an active member of the Civil Service pension scheme and do not take your classic pension, the income you are entitled to is simply lost - there is no actuarial enhancement of pension to reflect late drawing or payment of arrears. That gives a strong incentive to consider partial retirement at that point.

Frozen_up_north

The more important point is your quality of life, never mind the money. My OH took “flexible retirement” from the local government pension scheme and had more money going into the bank every month working 3 days doing the same job.

Your mileage may vary, but as an early retiree myself, I would look at retiring as soon as you feel comfortable doing so.

mapleoak

Hi hugheskevi

Thanks very much for the response - I think I have 40 years as "full" in my head as that perhaps used to be deemed the maximum (40/80th) pension available - i appreciate time has moved on.

I also understand that yes - for all intense and purposes I could take partial retirement now - I suppose 40 years is more a milestone of sorts.

Your final paragraph is a key one for me - If I am still an active member of the CS pension scheme at 60 (and I am still full time) then partial retirement probably makes even more sense given there is no further enhancement of pension to be had.

And yes - £30,000 is 0.6 of £50,000 - senior moment. I need to recast the numbers.

Kind Regards

mapleoak

Frozen_up_north wrote: »

The more important point is your quality of life, never mind the money. My OH took “flexible retirement” from the local government pension scheme and had more money going into the bank every month working 3 days doing the same job.

Your mileage may vary, but as an early retiree myself, I would look at retiring as soon as you feel comfortable doing so.

Thanks - yes that's very true. I suppose I could hang on until the "sweet spot" arrives numbers-wise but I'd rather be (relatively) young and healthy and able to enjoy it.

BoxerfanUK

Not forgetting of course that your pension will not be subject to NI so your net pay on that will be 12% higher in real terms.

mapleoak

BoxerfanUK wrote: »

Not forgetting of course that your pension will not be subject to NI so your net pay on that will be 12% higher in real terms.

I have to confess I never realised that - so any pension would be taxed but no NI? That's good to know.

BoxerfanUK

That's correct no NI on pension income.

I did something similar. Took my Classic pension @ 55 with 41/80 via 'Formal retirement', re-employed the next day in a lower grade (to avoid abatement) did another 4 years full time and finally retired last year @ 59 with 45/80. I could have gone part time in my old role but just had enough of the stress and hassle.

The bonus for me was as I had 'reserved rights' so the extra 4 years even though in a much lower grade and salary was based on my much higher pre-retirement salary so win win.

Also at the time I spoke to HMRC and had my tax code put on my pension income and my re-employed salary coded 'BR' so that I didn't have to faff about again with my tax code when I finally retired.

The one thing to bear in mind is get a state pension statement. In Classic you will have been contracted out so your state pension will be lower unless you either continue working and paying NI on your part time salary or pay voluntary class 3 NI if you stop working.

mapleoak

BoxerfanUK wrote: »

That's correct no NI on pension income.

I did something similar. Took my Classic pension @ 55 with 41/80 via 'Formal retirement', re-employed the next day in a lower grade (to avoid abatement) did another 4 years full time and finally retired last year @ 59 with 45/80. I could have gone part time in my old role but just had enough of the stress and hassle.

The bonus for me was as I had 'reserved rights' so the extra 4 years even though in a much lower grade and salary was based on my much higher pre-retirement salary so win win.

Also at the time I spoke to HMRC and had my tax code put on my pension income and my re-employed salary coded 'BR' so that I didn't have to faff about again with my tax code when I finally retired.

The one thing to bear in mind is get a state pension statement. In Classic you will have been contracted out so your state pension will be lower unless you either continue working and paying NI on your part time salary or pay voluntary class 3 NI if you stop working.

Hi Boxerfan

I am 56 - will have completed 40 years in 2021 - thankfully most of it will have been in Classic - will end up with a few years in Alpha.

Am considering two options - go after 40 years and look to do 3 days so partial retirement for perhaps another 2 years or so and then go when I'm around 60 - wife is a civil servant (albeit she has done part time for a large part of it) and 5 years younger so it would be good if we could time it that the both of us leave at the same time if possible, even if that means me working a little longer. Just checked my State Pension and it's currently showing £137 a week based on current contributions - if I make a further 6 years of NI contributions it will be max of £164 - although that's not until 2030 :shocked: - so I would need to be content that we can live reasonably well on our combined pensions and lump sums.

Assuming mortgage and other debts are paid off then our monthly outgoings would be a lot less - but would be nice to have occasional holidays, run a car, etc.

When I think of the spotty kid leaving school at 16 I would never have thought about retirement and I am glad we (wife and I) at least have a form of pension to look forward to - many don't. It's more making the right decision and it's one of the things that nobody else can make for you.

bluenose1

I have a deferred civil service pension in the classic scheme that I intend to take at 55 to allow me to fully retire. When I have done the sums worth it for me to retire to have the extra 5 years of not getting up at 6:30am for a job I sometimes enjoy but find stressful.
I won't take the 12:1 max lump sum as don't think that is financially worth it.
2 years and 2 months to go. Not that I am counting. ��