Civil Service Pension and SIPP

german_keeper

luvsbargins said:

Hi Bravepants. If I were to retire at 62, I would make no further contributions into Alpha from that day up to my 67th birthday. The pension amount would remain static for 5 years. Therefore would there be any point in holding onto that pension for 5 years? If I took it at 62 would they reduce it for taking it early?

I think your Alpha pension would be increased by CPI each year from 62 to 67. And current AR factor for retiring at 62 with Normal Pension Age of 67 is 0.76. That means you would receive 76% of your full Alpha entitlement calculated at the point of retirement. If you google something like alpha pension actuarial reduction you should see the link to the booklet with information and tables on MyCSP website.

Have you obtained a state pension forecast? The new state pension rules are very favourable for most civil servants, particularly us lifers! I will have paid enough contracted in contributions for a full state pension by April 2023. The new state pension was a real game changer for me and my wife. Assuming I make those conts till April 23 it will be about £18k pa between us at 67.Considering we have brought up 3 kids and paid off the mortgage without ever earning £40k pa between us that's a decent amount for us and all our plans work backwards from that point.

I took partial retirement last year when I was 54 and my projections are suggesting I will be able to retire fully at 60, possibly a bit before. My current target is April 2023 which is 16 months before I am 60 but whilst that is certainly challenging it may ultimately prove to be not achievable.      

moo121

Hi luvsb,

If you google "alpha early retirement factors" you will find the guidance and the tables for taking the alpha part of your pension early. At age 62  you would receive approximately 0.76 times the amount you had accumulated to that date.  You should be able to work out whether that amount plus your Classic plus pension will be enough for you.

luvsbargins

Hi German keeper, thanks for your reply. I already decided this morning that I’ll be having a good read of the Alpha literature soon! Although I prefer to read stuff like that on paper rather than a computer screen, I find it easier to take in.

From what you’ve said though it looks like it would be better to hold on the the Alpha pension from age 62-67 and not go down the AR route.

I haven’t bothered with the state pension forecast yet as I feel fairly confident I’ll have paid in enough years by the time I retire you get the full entitlement. If I were a little older with longer service, then there would be a risk of being contracted out too long, then I would need to top up with voluntary contributions.

Well done on partial retiring early, and potentially retiring early too. You have clearly done loads of research and it’s paying off for you. I don’t regret not having started my research earlier as I am happy with my financial situation now, and confident that me and hubby will be comfortable in our retirement. I think living up north where property prices have been low, and all the Saturday & Sunday overtime that some of us Civil Servants had in the 1990’s Has been a great help, considering our relatively low incomes.

As you intend to leave the Civil Service as a ‘youngster’ (am I right in thinking you’ll only be 58), will you have any other pensions, besides the civil service one, to help tide you over to state pension age?

german_keeper

I think it;s probably wise to keep your options open with AR. I always assumed I wouldn't want a reduced pension but when I did my partial retirement sums last year the numbers added up ok so I went for it. Four day weekends - flippin marvellous!

Also I would definitely suggest getting a State Pension forecast. It's a fairly simple process and very informative. Looks like your situation may be similar to mine in that you have always been contracted out. But as I understand it I have got 2 or 3 full years contracted in due to 16-18 education. I started work at 18 so if you left school at 16 or went to Uni yours may be different. 

I am in the Partnership scheme. Definitely not as good as Alpha but it is a DC scheme so allows me full drawdown before SP at 67, although if I live to average life expectancy Alpha would pay more overall. I have a spreadsheet which is called "A Bit of Bully" where every April I track what would have happened in Alpha. Currently shows about double pa from Partnership with full drawdown between 60 and 67. I then factor in the lower 3% contribution and that suggests it will be about 15 years before Alpha pays out more. So I am happy enough with that.

We are currently paying £500 per month into my wife's NEST pension. She has a reasonable deferred DB pension from when she worked for Norwich Union and this simple NEST one with her current employer. The reason the money is going in there rather than my Partnership is that my Classic and Partnership drawdown takes me above PTA so I would be taxed on it. Her NU pension plus an annual drawdown from NEST will still leave her below PTA.

Finally we have about £27,000 in savings which is mainly my Classic lump sum less the cost of a rather luxurious All Inclusive in Tenerife in January. We are mortgage free and until Covid 19 seems to have created boomerang tendencies in our 2 daughters we were also hoping to save some cash as well as putting £500 into NEST. On top of that our electricity "Smart" meter decided to break early this year so currently due to Covid 19 they can't come out to fix it. So whilst I was looking forward to a period of working out how much extra reduced bills and suchlike would allow us to throw into the pot that seems to be on hold.

Overall projection shows about £30k pa from 60-67, very little tax and much of it index linked, and then about £34k pa from 67, all index linked but also all taxable. Downsizing the house and inheritance are the 2 wild cards. 

luvsbargins

Yes, I do need to keep an open mind about the AR situation, at aged 61, 62 etc, circumstances can change and I might need that income.

I agree I need my SP forecast. I started work aged 16 in 1980. Entered civil service 1982 and was contracted out for many years, then, just a few years ago, can’t remember exactly when, we all stopped being contracted out. Since I’ve got a few years left to work, I should be on target to get full state pension.

Although I’m having a weekend of looking into my pension, this type of time consuming activity doesn’t happen often. I work 5 days a week, and even throughout Covid-19 have been working in the office. 

Hope the Partnership pension works out for you in the long run. When you and your wife retire, if she is a non taxpayer, she can transfer some marriage allowance to you, so you’ll pay very little tax indeed.

We have a little more in savings than you have, however, we are still paying mortgage of approx £380 pm, for the next 10 years. No intention of paying it off early whilst interest rate is so low. (It’s a tracker rate mortgage).

I’m impressed at your £30000 income from age 60-67. Just goes to show what early retirement planning can do for you. Hope you manage that early escape you’re after, and thanks for all the information and advice.

Audaxer

luvsbargins said:

I agree I need my SP forecast. I started work aged 16 in 1980. Entered civil service 1982 and was contracted out for many years, then, just a few years ago, can’t remember exactly when, we all stopped being contracted out. Since I’ve got a few years left to work, I should be on target to get full state pension.

I also assumed that as I had made over 40 years of full contributions that I would qualify for the maximum new State Pension, but after I retired I discovered that I still needed to make 6 years of voluntary contributions to get to the maximum amount. However I am now quite happy to make these voluntary contributions over the next few years as I will recover the amount paid within 4 years of receiving the State Pension.

Colin_Williamson

Good afternoon

After 35 years service I took advantage of the VES offered by the Welsh Government in July 2017.  As a member of the classic pension scheme I understand that my pension has been frozen since that date. My question is, am I correct in assuming that although frozen my pension will still  be increasing by 2% on a year by year basis. The other question (hopefully) is would this 2% apply to any lump sum as well.

83705628

Colin_Williamson said:

Good afternoon

After 35 years service I took advantage of the VES offered by the Welsh Government in July 2017.  As a member of the classic pension scheme I understand that my pension has been frozen since that date. My question is, am I correct in assuming that although frozen my pension will still  be increasing by 2% on a year by year basis. The other question (hopefully) is would this 2% apply to any lump sum as well.

/
Hi, if this is a new post then you'll generally get a better response by creating a new thread then by posting in someone else's thread. I found this (https://gov.wales/sites/default/files/publications/2020-01/ATISN%2013663.pdf) but it doesn't seem to answer your question but in general, if you have a deferred ("frozen") civil service pension then it will still be linked to inflation, not necessarily 2%.

xylophone

my pension has been frozen 

https://www.gmb.org.uk/sites/default/files/Guide to CS Pension Schemes.pdf

b. Deferred Pension

If you leave the pension scheme and you have more than two years’ service then you will have a deferred pension. This is a pension that will be paid to you upon reaching retirement age or you may take when you reach 55 (age 50 if you were a member of the scheme before April 2006) but there will be a reduction for taking it early before your normal pension age. Every year your pension is deferred it will be increased in-line with CPI (Consumer Price Index). 

4.2 Your Pension Benefit 

You will also receive 3x your pension as an automatic tax free lump sum on retirement.

a. Tax Free Lump Sum

It is possible to take additional lump sum in exchange for a smaller annual pension. For every £1 of annual pension you give up you receive £12 as a lump sum. 

hugheskevi

Colin_Williamson said:

After 35 years service I took advantage of the VES offered by the Welsh Government in July 2017.  As a member of the classic pension scheme I understand that my pension has been frozen since that date. My question is, am I correct in assuming that although frozen my pension will still  be increasing by 2% on a year by year basis. The other question (hopefully) is would this 2% apply to any lump sum as well.

The correct terminology is that your classic pension had a deferred award calculated in July 2017.

That award is revalued each year by the change in prices (currently CPI) from July 2017 (you would have received part-year revaluation for 2017/18) until you choose to start receiving it. In the event of negative inflation your pension remains the same.

The lump sum is 3 times the pension, so the lump sum also benefits from annual revaluation.