Sorry for being a Civil Servant but I would love some help

jerrysimon

I retired from CS in 2017 aged 56.5. Started at 16.5 years of age so 40 years service. I lost about £3.5K/year taking my Classic DB pension early (payable at 60) but haven't regretted it. So far I have got 45K in pension payements (plus 53K lump sum) paid out and haven't regretted leaving early for a minute. Lots of extra time with new grandchildren and doing voluntary work, so its all good

I worked it out it would take me 10+ years ish, dependent on inflation, to get my early payment of pension back, if I had waited till 60. I will have to wait till 66.5 years of age for SP.

PS I will never appologise for being a CS. Moved all over the place and chose to stay in it for the pension benefits.

As stated, we never know what the future holds and I was ready to stop working.

hugheskevi

Would have been the change in the scheme back in 2015 when Classic was closed and Civil Servants had to choose between moving to Partnership or Alpha (unless you were over 55 when there was a transitional period before they would be moved over).

So a better question would be why Partnership and not Alpha.

Yes, I initially thought the OP was 58, but that was in a later post. The OP is 55 so yes, the choice is between alpha and Partnership. For a 55 year old, alpha is far more valuable than Partnership, so unless there would be a detrimental impact on the deferred classic award switching back to alpha would be a serious consideration.

Even if there were a significant detrimental effect on the classic award, if the OP switched back to alpha more than 5 years after moving to Partnership, the classic pension would remain as a deferred award.

Pension age for Alpha was/is 67 so that was going to be a no straight away.

Pension age is equal to State Pension age, with a minimum of 65. So it ranges between 65 and 68 currently.

The pension can be taken early with actuarial reduction, and it is very common that members would get a higher pension moving to alpha and taking a reduced alpha pension at 60 than staying in classic and taking an unreduced classic pension at 60. This is because of the much higher accrual rate in alpha.

GunJack

hugheskevi wrote: »

Civil Service does not offer salary sacrifice pension contributions.

!!!!!!?? The new-fangled ones aren't taken before tax?? I'm glad all my deferred is in Classic....

mapleoak

jerrysimon wrote: »

I retired from CS in 2017 aged 56.5. Started at 16.5 years of age so 40 years service. I lost about £3.5K/year taking my Classic DB pension early (payable at 60) but haven't regretted it. So far I have got 45K in pension payements (plus 53K lump sum) paid out and haven't regretted leaving early for a minute. Lots of extra time with new grandchildren and doing voluntary work, so its all good

I worked it out it would take me 10+ years ish, dependent on inflation, to get my early payment of pension back, if I had waited till 60. I will have to wait till 66.5 years of age for SP.

PS I will never appologise for being a CS. Moved all over the place and chose to stay in it for the pension benefits.

As stated, we never know what the future holds and I was ready to stop working.

Hi JerrySimon

I’m with you on that one - nothing wrong with being a CS and a lot to be proud of. Little did I know when I joined as a relatively fresh faced 18 year old that it would offer a (relatively) decent pension at the end of it almost 40 years later. I’m fortunate that I got a promotion recently so that will help with the final figure in the next few years - just deciding whether partial retirement is the best option as I know a few who have taken that option and say it offers the best of both worlds.

hyubh

GunJack wrote: »

!!!!!!?? The new-fangled ones aren't taken before tax?? I'm glad all my deferred is in Classic....

Salary sacrifice is something different from net pay arrangements. The Civil Service did and does operate the latter.

jerrysimon

mapleoak wrote: »

Hi JerrySimon

I’m with you on that one - nothing wrong with being a CS and a lot to be proud of. Little did I know when I joined as a relatively fresh faced 18 year old that it would offer a (relatively) decent pension at the end of it almost 40 years later. I’m fortunate that I got a promotion recently so that will help with the final figure in the next few years - just deciding whether partial retirement is the best option as I know a few who have taken that option and say it offers the best of both worlds.

Thanks. I would have gone down to part time possibly, if it had been available but it wasn't. Getting promotion towards the end is also a great bonus or even VE . I wasn't so lucky in either case, but still count myself fortunate to have a good DB pension behind me from 16. I also got a lot of help when moving jobs/locations, back in the days when they paid public interest transfer terms. I think it's important to exit slowly, so as that wasn't an option for me I chose to do some voluntary work a day or two a week.

Altarf

Turned_out_nice. wrote: »

Pension age for Alpha was/is 67 so that was going to be a no straight away.

hugheskevi wrote: »

Pension age is equal to State Pension age, with a minimum of 65. So it ranges between 65 and 68 currently.

The pension can be taken early with actuarial reduction, and it is very common that members would get a higher pension moving to alpha and taking a reduced alpha pension at 60 than staying in classic and taking an unreduced classic pension at 60. This is because of the much higher accrual rate in alpha.

I was just about to say the same thing.

There is also the benefit that Alpha doesn't automatically come with a lump sum although has the option of converting pension to a lump sum if desired, so avoiding the poor conversion rate if you prefer pension to lump sum.

GunJack

hyubh wrote: »

Salary sacrifice is something different from net pay arrangements. The Civil Service did and does operate the latter.

Hang on, WPS was always taken before tax....ok, so only 1.5%, or are you referring to everything that came after Classic?

hugheskevi

Hang on, WPS was always taken before tax....ok, so only 1.5%, or are you referring to everything that came after Classic?

There are 4 main ways in which tax relief is provided for pension contributions:

1. Net pay arrangement. Pension contributions are deducted before PAYE is applied. Advantages: gives full tax relief to most employees, and avoids higher/additional rate taxpayers having to claim relief from HMRC. Disadvantages: gives no tax relief to those with income below income tax personal allowance, does not give any National Insurance advantages.
2. Relief at source: Pension contributions are deducted after PAYE is applied, pension provider claims basic rate tax. Advantages: gives tax relief to those with incomes below income tax personal allowance, easiest system for employers/payrolls to operate. Disadvantages: higher/additional rate taxpayers have to reclaim tax relief from HMRC, no National Insurance benefits, doesn't work with Defined Benefit pension contributions.
3. Salary sacrifice - employee contributions are converted into employer contributions. Advantages: employees do not have to reclaim income tax relief from HMRC, National insurance advantages (always on employee National Insurance, and employer may also pass on some or all of the employer National Insurance savings to the employee too). Disadvantages: those with income below income tax personal allowance do not get tax relief, the most onerous process for employers/payrolls.
4. Employee reclaims 100% of relief from HMRC. This is used for things like lump sum purchases of Added Pension and also for contributions to legacy Retirement Annuity Contracts. Advantages: none. Disadvantages: those with income below income tax personal allowance get no relief, all employees have to reclaim tax relief from HMRC, and HMRC have a very poor understanding of this form of relief so may well (incorrectly) insist it can't be done. No National Insurance benefits.

The Civil Service currently uses net pay arrangement for most pension contributions, and employee reclaims 100% of relief from HMRC for a very small number of lump sum payments for member pension options. The Civil Service has never operated salary sacrifice for any pension contributions.

german_keeper

Thanks to all for the posts. Good to hear from other career Civil Servants. I am very proud of things that I have done over the years to help people in genuine need. Many years ago when I worked in Operations for the Benefits Agency colleagues used to call me the punter's pal and I was very proud of that. Nowadays it just feels like we are second class citizens, even within the public sector there is the deserving public sector, nurses, firemen etc, and the undeserving public sector, us civil servants. Maybe I just need to stop being so touchy!

The whole Classic/Alpha/Partnership thing was a right old palaver back in 2015 when they made the changes. I could have stayed in Classic for another 2 or 3 years under the transitional arrangements, which would have been my choice, but at the time the rules said you couldn't move from Classic to Partnership. It was quite ludicrous really, anyone in Alpha, Premium, Classic Plus, Nuvos could move to Partnership but not Classic. That rule was very quietly changed a few months later. Unfortunately by then I had moved to Partnership. At that time you could only switch in April or October so the only way for me to join Partnership was to go into Alpha in April 15 and then Partnership in October 15. So I now have a piddling little 6 months in Alpha. Haven't made my mind up what to do with it yet, probably just take it at SPA and treat myself to a couple of pints. Now you can switch whenever you want.

The reason why I switched to Partnership: Alpha with AR would have generated about £3.8k pa at 60. With 17.75% employer conts and 3% from me a total of about £50k would go into Partnership, available to drawdown before SPA. With only paying 3% instead of 5.45% the £50 or so per month extra in take home pay was also very useful at the time when things were a bit tight, but that wasn't really crucial in my decision, just a nice little bonus on the side. These numbers are based on full time earnings, at the time I wasn't aware I would be taking partial retirement.

Another very important point was that for many years now I have had no interest in promotion. The issue here is that in Partnership my Classic was deferred and therefore increased by CPI annually. If you are in Alpha your Classic is calculated at your salary when you retire. When I took my Classic earlier this year the 4 years CPI increases were much higher than my pay "rises" over that time.

Obviously if I live to say 80 or 85 the Alpha would have paid significantly more overall but we would have had a large difference in income pre and post SPA. Between us we have never had a joint income of more than £40k so we will be very comfortable in our retirement. Already seeing massive differences in bills and suchlike as the kids start to fly the nest. Equity from downsizing and inheritance are also very likely but no guarantees so we haven't factored that in to our plans.

My calculations were based on the values at that time, without factoring inflation in. My main concern was that with Alpha I would have the guaranteed annual CPI increase but with Partnership no such guarantee, I was dependent on investment returns. Thus far the amount in my pot is about 14% higher than what has been paid in. I recently calculated what the compounded CPI increases in Alpha would have been and I think it came out at about 8% so unless I am missing something I think I am well in front on that one.

Thanks again for the comments. Whilst I find the threads discussing investments and suchlike very interesting, much of it really is way above my head. So it's been good to discuss things I am more comfortable with.