Civil Service / State Pension rises

GibbsRule_No3

Not that it affects me yet but I was reading the CS Newsletter and it mentioned the 2.4% rise but in a Q&A it said that if you were in receipt of SP and worked for CS before April 1997 then part of the rise would be paid in the SP so you would not get 2.4% why is this and how much rise on CS would you get if any?

Second question if you start your SP after 2016 but were working for CS before 1997 will that post 2016 SP also not receive the full CS rise in future? That would affect me. Also what happens to the rise if you are taking the CS Pension, did work for them before 97 but are not in receipt of SP, will the 2.4% be paid?

zagfles

GibbsRule_No3 wrote: »

Not that it affects me yet but I was reading the CS Newsletter and it mentioned the 2.4% rise but in a Q&A it said that if you were in receipt of SP and worked for CS before April 1997 then part of the rise would be paid in the SP so you would not get 2.4% why is this and how much rise on CS would you get if any?

The GMP element increase is capped at 3% for service 1988-1997 and no increase for 1978-1988. For people who reached state pension age before April 2016 their contracted out deduction (COD) to their SERPS/S2P gets indexed the same (ie 0% or capped at 3%), effectively resulting in the state providing the increase above the caps. There are loads of foibles with this, particularly if you've got a deferred contracted out pension. Usually works in the member's favour.

Second question if you start your SP after 2016 but were working for CS before 1997 will that post 2016 SP also not receive the full CS rise in future? That would affect me. Also what happens to the rise if you are taking the CS Pension, did work for them before 97 but are not in receipt of SP, will the 2.4% be paid?

If you reach SPA after April 2016 then GMP indexation above the cap is lost, there is no mechanism in the new state pension to do as above. Usually, gains from the new state pension outweigh this except for people reaching SPA shortly after April 2016.

However as usual public sector pensions (unlike virtually all private) seem to be compensating members for this - see https://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN04956


We've had very long technical discussions on this here if you want to search the archives

molerat

The can is being kicked down the road until April 2021 so if reaching SPA before then the full CS pension increase will be applied. A work around is being looked into but I strongly suspect another can kicking session will follow.

GunJack

zagfles wrote: »

We've had very long technical discussions on this here if you want to search the archives

...and I must admit I still don't really get it... as a deferred PCSPS member of 20 yrs with service from 1988-2007 and SPA of 67 in 2034 it should affect me I think but I still don't get it :mad:

xylophone

...and I must admit I still don't really get it... as a deferred PCSPS member of 20 yrs with service from 1988-2007 and SPA of 67 in 2034 it should affect me I think but I still don't get it

Let's suppose the new state pension had never been introduced and we had stuck with the old system.

Let's say that SPA had not increased beyond age 65.

Let's suppose that a certain Mr X (employed in a business offering a DB contracted out pension scheme) had reached the normal retirement age (let's say 60) and started to draw his pension.

He finds that each year the whole of that pension is inflation linked under scheme rules - let's say that those rules dictate an unrestricted CPI increase.

Mr X reaches age 65 and claims his state pension.

The scheme administrator now writes to him to advise that as he has now reached GMP age, that part of his pension that represents his pre 88 GMP will not be increased by the Scheme, that part that represents his 88-97 GMP will only be increased up to CPI at 3% and the balance will be increased as heretofore under Scheme rules (unrestricted CPI).

The pre 88 GMP and any 88 - 97 GMP over 3% will be increased through an adjustment to his Additional State Pension and paid with his state pension.

Now let's factor in the increase in State Pension Age. Although SPA went up, there was no increase to GMP age, which remained at age 65 for males.

The Public Service Schemes decided to be generous and continue to increase the whole of the pension under Scheme Rules until the increased SPA was reached.

Now let's factor in the new state pension which abolishes the mechanism by which the GMP increases can be paid through an adjustment to the Additional State Pension.

Let's say that Mr X reaches SPA a few months after the introduction of new SP.

He now finds that the GMP increase rules start to be applied by his Scheme.

There is now no mechanism to inflation link his GMP through the State Pension.

The Government originally decided that members of Public Service Schemes reaching SPA after April 5 2016 and before 6 December 2018 would simply continue to have their pensions fully index linked (as they had before reaching SPA), for life.

Their State Pensions would be index linked under the rules relating to increases in new state pensions (currently triple lock).

This has now been extended to those who reach SPA before 6 April 2021.

What happens after that? Who knows?

GibbsRule_No3

I think I’ll just wait and see what happens next year (actually probably the year after, as I guess a qualifying year will be needed before the rise takes effect) when I get both my SP and my CSP and ask my friend, who already has both her SP and CSP what rise she gets in her CSP this year. The amount it is likely to be will probably not make it worthwhile trying to work out what is what. It was the Q&A that said not all people would get the 2.4% that made me wonder. £ here or there a month I don’t think I’ll notice in the great scheme of things.

GunJack

xylophone, thanks for that...so to check my understanding, currently:-
1. my (whole) deferred (1988 to 2007)service goes up by CPI annually.
2. This continues at CPI until payment at 60 (2027), continuing until 65.
3. At 65 is when it'll split, so some at CPI max 3%, rest at CPI, paid by scheme? Or don't we know yet until 2021? I think it's this part I'm still a little fuzzy on...

as an aside, I'll have 18/19 as my last year of NI to give full newSP, not that I think that has any bearing on the GMP stuff...

xylophone

Your deferred pension is revaluing in deferment.

You can draw the pension at age 60 in 2027.

As things currently stand the whole of the pension will be inflation linked under Scheme Rules until you reach SPA.

After that? Unknown!

GunJack

xylophone wrote: »

Your deferred pension is revaluing in deferment.

You can draw the pension at age 60 in 2027.

As things currently stand the whole of the pension will be inflation linked under Scheme Rules until you reach SPA.

After that? Unknown!

Thanks for confirming, I finally get it!!

Tom99

xylophone wrote: »

The Government originally decided that members of Public Service Schemes reaching SPA after April 5 2016 and before 6 December 2018 would simply continue to have their pensions fully index linked (as they had before reaching SPA), for life.

Their State Pensions would be index linked under the rules relating to increases in new state pensions (currently triple lock).

This has now been extended to those who reach SPA before 6 April 2021.

That's fine for ex civil servants but if your pension is from say a company employer you are not so lucky.