Civil Service Pension - abatement or not too abate?

Daveatmosshill

Hello folks

Sadly I’ve had to come to this forum as I’ve received mixed messages from The Civil Service Pension scheme customer helplines.

I’m due to go partially retired in the next couple of months and have agreed my new working hours / salary and I’m now looking to use my pension entitlement to make up the difference. 

I am in the Classic scheme (final salary) which is due to close on 31/03/22. 

I have two options ((I think) - 

Option 1 - if I take all of my pension it will have abatement applied meaning I’ll lose about £4,000 until I finally retire when it will go back up to the full amount. I intend to work about 3 more years. 

Option 2- only take what I need to make my salary and pension the same as my previous full time salary which means I would claim £4,000 less than I have built up. 

Sadly no one has been able to advise me which is the best option to take. If I claim the lesser amount for now (option 2) what happens to the £4,000 per year? The advice online suggests it is converted back to ‘reckonable service’ so does that mean I will get more pension when I finally retire? 

I’m tempted to go for Option 1 as I’ll know exactly what I get when I do finally retire (and I’m a no risk type of guy) but any help out there would be greatly appreciated. 

Thank you in advance 

Dave

hugheskevi

Daveatmosshill said:

Hello folks

Sadly I’ve had to come to this forum as I’ve received mixed messages from The Civil Service Pension scheme customer helplines.

I’m due to go partially retired in the next couple of months and have agreed my new working hours / salary and I’m now looking to use my pension entitlement to make up the difference. 

I am in the Classic scheme (final salary) which is due to close on 31/03/22. 

I have two options ((I think) - 

Option 1 - if I take all of my pension it will have abatement applied meaning I’ll lose about £4,000 until I finally retire when it will go back up to the full amount. I intend to work about 3 more years. 

Option 2- only take what I need to make my salary and pension the same as my previous full time salary which means I would claim £4,000 less than I have built up. 

Sadly no one has been able to advise me which is the best option to take. If I claim the lesser amount for now (option 2) what happens to the £4,000 per year? The advice online suggests it is converted back to ‘reckonable service’ so does that mean I will get more pension when I finally retire? 

I’m tempted to go for Option 1 as I’ll know exactly what I get when I do finally retire (and I’m a no risk type of guy) but any help out there would be greatly appreciated. 

No scheme representative will provide advice about the decision, they will simply provide the factual information.

The scheme is 'take it or lose it' ie, if you do not take it, you will not in future receive arrears of the undrawn amount or an actuarially enhanced pension to reflect that you did not receive what you could have received.

If you do not take all of the pension, the part untaken is linked to earnings. Take it all and it is linked to prices. 

The usual option to consider is setting your reduced hours such that you take all of the pension at age 60 and the combination of pay from reduced hours plus pension equals your previous full-time salary to avoid abatement.

Daveatmosshill

Thanks Hugh

I tried to reduce my hours to use all of my pension but they wanted me to work more. 

So basically it makes little difference either way?

Dave

drummersdale

Hi Dave - I am hoping to go partial myself next year (around June) - I will have around 40 and a half years service by then - as @hugheskevi has said I am hoping that I can reduce my hours to a point where my pension (given there will be no NI paid on it) plus P/T salary equates to just less than my current salary - so to avoid any form of abatement.  I haven't started the conversation with my employer as yet (as I believe the process takes around 4 months from applying) but am hoping they will agree (I have already established there are a number of people at my grade or above who currently have a similar arrangement).  That, for me, appears to be the best option.  Once you apply won't you get details from MyCSP outlining what your options (and values are) before you sign and send back?  

Good luck with the decision hope it works out.

hugheskevi

Daveatmosshill said:

Thanks Hugh

I tried to reduce my hours to use all of my pension but they wanted me to work more. 

So basically it makes little difference either way?

Dave

Yes, unless your salary is very different to inflation it should be quite similar. In either case you will be doing £4,000 p/a of work for nothing.

Daveatmosshill

drummersdale said:

Hi Dave - I am hoping to go partial myself next year (around June) - I will have around 40 and a half years service by then - as @hugheskevi has said I am hoping that I can reduce my hours to a point where my pension (given there will be no NI paid on it) plus P/T salary equates to just less than my current salary - so to avoid any form of abatement.  I haven't started the conversation with my employer as yet (as I believe the process takes around 4 months from applying) but am hoping they will agree (I have already established there are a number of people at my grade or above who currently have a similar arrangement).  That, for me, appears to be the best option.  Once you apply won't you get details from MyCSP outlining what your options (and values are) before you sign and send back?  

Good luck with the decision hope it works out.

Thanks Drummersdale

For me it would have meant working about 4 hours less and it was clear from the onset that I would get it, though they have been very accommodating with days of the week and working pattern etc. 

MyCSP initially sent me the full retirement forms and told me that this was the correct procedure! Just be careful, its a minefield out there! Good luck with your application and I hope you get what you want. 
 

Daveatmosshill

hugheskevi said:

Daveatmosshill said:

Thanks Hugh

I tried to reduce my hours to use all of my pension but they wanted me to work more. 

So basically it makes little difference either way?

Dave

Yes, unless your salary is very different to inflation it should be quite similar. In either case you will be doing £4,000 p/a of work for nothing.

hugheskevi said:

Daveatmosshill said:

Thanks Hugh

I tried to reduce my hours to use all of my pension but they wanted me to work more. 

So basically it makes little difference either way?

Dave

Yes, unless your salary is very different to inflation it should be quite similar. In either case you will be doing £4,000 p/a of work for nothing.

One final question Hugh 

I know that if I take the full amount and its 'abated' then my pension will increase to the original amount when I finally retire. 

But if I took less (to avoid abatement) then when I finally retired would my pension go back up to what I have earned or would it be recalculated (with as you said earlier the unclaimed amount being linked to earnings) meaning that I could possibly get less?

This is probably not helped by the Classic scheme ending on 31/03/22 with everything after that going in the alpha scheme on a career average scheme and not payable until I was 67 (I'm 60 in May 22).

Thanks in advance Dave.  

drummersdale

Daveatmosshill said:

drummersdale said:

Hi Dave - I am hoping to go partial myself next year (around June) - I will have around 40 and a half years service by then - as @hugheskevi has said I am hoping that I can reduce my hours to a point where my pension (given there will be no NI paid on it) plus P/T salary equates to just less than my current salary - so to avoid any form of abatement.  I haven't started the conversation with my employer as yet (as I believe the process takes around 4 months from applying) but am hoping they will agree (I have already established there are a number of people at my grade or above who currently have a similar arrangement).  That, for me, appears to be the best option.  Once you apply won't you get details from MyCSP outlining what your options (and values are) before you sign and send back?  

Good luck with the decision hope it works out.

Thanks Drummersdale

For me it would have meant working about 4 hours less and it was clear from the onset that I would get it, though they have been very accommodating with days of the week and working pattern etc. 

MyCSP initially sent me the full retirement forms and told me that this was the correct procedure! Just be careful, its a minefield out there! Good luck with your application and I hope you get what you want. 
 

To be honest @Daveatmosshill I'm hoping to go down to 3 days a week (so 40% less) so I expect I will avoid abatement anyway - but agree it's a minefield - you just want to make sure you get it right first time around!

hugheskevi

Daveatmosshill said:

I know that if I take the full amount and its 'abated' then my pension will increase to the original amount when I finally retire. 

But if I took less (to avoid abatement) then when I finally retired would my pension go back up to what I have earned or would it be recalculated (with as you said earlier the unclaimed amount being linked to earnings) meaning that I could possibly get less?

This is probably not helped by the Classic scheme ending on 31/03/22 with everything after that going in the alpha scheme on a career average scheme and not payable until I was 67 (I'm 60 in May 22).

My understanding is that the untaken part would be calculated when it came into payment, based on your final salary at the (future) time it is taken. Compared to a scenario where you take all your pension, you could win or lose from this. If your salary has increased by more than inflation you win. If it has increased by less than inflation you lose.

The change to alpha doesn't make any difference to the decision (I think). Although, the McCloud issue rather complicates everything, as you may well be better off under alpha benefits for the 2015-22 period, and alpha pension is not subject to abatement. So in due course it may well be that you end up choosing alpha benefits, and not being so heavily abated.