Classic Civil Service Pension and best of the last 3 years calculation and inflation adjustment

m_c_s

Scenario:

Final year in work pensionable pay 2022 estimated = £26500
Pensionable pay for 2021 = £27700
Pensionable pay for 2020 = £25000

How is the best of the last 3 years pensionable pay calculated and is inflation adjustment used in the calculations? (taking CPI for 2020 as 0.5%, 2021 as 3.1% and assume 2022 is 10%). What would be the final pensionable pay that MyCSP would use for calculating Classic benefits?
  

hugheskevi

Final year in work pensionable pay 2022 estimated = £26500

Pensionable pay for 2021 = £27700

Has annual Full-Time Equivalent (FTE) pensionable earnings (ie salary plus any pensionable allowances) decreased in 2022? Or is the lower figure just from not working the full year?

How is the best of the last 3 years pensionable pay calculated and is inflation adjustment used in the calculations? (taking CPI for 2020 as 0.5%, 2021 as 3.1% and assume 2022 is 10%). What would be the final pensionable pay that MyCSP would use for calculating Classic benefits?

Start at last day of service. Look at pensionable earning (FTE-basis) over preceding 12 months. Step back 91 days. Look at pensionable earning (FTE-basis) over preceding 12 months. Repeat step-backs until a period of 3 years has been covered. Select highest figure in cash terms (ie no inflation adjustment at this stage). If there are 2 or more highest figures (eg a salary freeze) then choose the most recent figure.

If the period corresponding with the highest cash figure is in the past, it is revalued to last day of service in line with CPI.

m_c_s

hugheskevi said:

Has annual Full-Time Equivalent (FTE) pensionable earnings (ie salary plus any pensionable allowances) decreased in 2022? Or is the lower figure just from not working the full year?
Will be leaving job in October but have leave etc taking unto Jan\Feb 2023.

Will be retiring from job in October but have a lot of leave and flex hours built up taking last day of Service to be in Jan 2023 so pensionable earnings will be lower than last year.

m_c_s

hugheskevi said:

Start at last day of service. Look at pensionable earning (FTE-basis) over preceding 12 months. Step back 91 days. Look at pensionable earning (FTE-basis) over preceding 12 months. Repeat step-backs until a period of 3 years has been covered. Select highest figure in cash terms (ie no inflation adjustment at this stage). If there are 2 or more highest figures (eg a salary freeze) then choose the most recent figure.

If the period corresponding with the highest cash figure is in the past, it is revalued to last day of service in line with CPI.

So will MyCSP know the monthly or daily pensionable pay to work that calculation out?

kassy64

I believe mycsp are given your salary on a monthly basis by your employer.

Andy_L

m_c_s said:

hugheskevi said:

Has annual Full-Time Equivalent (FTE) pensionable earnings (ie salary plus any pensionable allowances) decreased in 2022? Or is the lower figure just from not working the full year?
Will be leaving job in October but have leave etc taking unto Jan\Feb 2023.

Will be retiring from job in October but have a lot of leave and flex hours built up taking last day of Service to be in Jan 2023 so pensionable earnings will be lower than last year.

The use the Full Time Equivalent so working less than a full year will be allowed for

hugheskevi

m_c_s said:

hugheskevi said:

Has annual Full-Time Equivalent (FTE) pensionable earnings (ie salary plus any pensionable allowances) decreased in 2022? Or is the lower figure just from not working the full year?
Will be leaving job in October but have leave etc taking unto Jan\Feb 2023.

Will be retiring from job in October but have a lot of leave and flex hours built up taking last day of Service to be in Jan 2023 so pensionable earnings will be lower than last year.

It sounds from the above posts that your pensionable income has not reduced, in which case there is no inflation adjustment and the final salary used is just pensionable earnings in last 12 months.

It is an oddity about the definition - due to high inflation, your pension would be a lot higher if you had been paid a little less (in cash terms) this year and so benefitted from an inflation adjustment. It may well have been better to have switched to Partnership last March and so benefitted from a c10% inflation uplift to a deferred award over 2022/23, but that is all hindsight.

m_c_s

It sounds from the above posts that your pensionable income has not reduced, in which case there is no inflation adjustment and the final salary used is just pensionable earnings in last 12 months.

Well not quite. In 2021 I had a delayed pay rise (that was from 2019). It took 18 months to be applied to my salary so landed in 2021 salary including a large backdating amount. So that is why I am expecting 2021 pensionable salary to be more than current 2022 salary even accounting for the FTE equivalence being applied.

hugheskevi

m_c_s said:

Well not quite. In 2021 I had a delayed pay rise (that was from 2019). It took 18 months to be applied to my salary so landed in 2021 salary including a large backdating amount. So that is why I am expecting 2021 pensionable salary to be more than current 2022 salary even accounting for the FTE equivalence being applied.

Unfortunately, for final salary purposes, back-dated pay is treated as having been received when due (alpha treatment is different, being treated as received when paid).

mp11

hugheskevi said:

What would be the final pensionable pay that MyCSP would use for calculating Classic benefits?

Start at last day of service. Look at pensionable earning (FTE-basis) over preceding 12 months. Step back 91 days. Look at pensionable earning (FTE-basis) over preceding 12 months. Repeat step-backs until a period of 3 years has been covered. Select highest figure in cash terms (ie no inflation adjustment at this stage). If there are 2 or more highest figures (eg a salary freeze) then choose the most recent figure.

If the period corresponding with the highest cash figure is in the past, it is revalued to last day of service in line with CPI.

Hello, and thanks for the comments in this thread. 

My questions, concerning the Civil Service Pension Scheme, Classic, follow on from the post and its responses:

1)      The response includes the statement that indexation is added to the result of the 3 year sliding window. What is the basis of the inflation indexed revaluation up to the last day of service, if a period of higher cash value pensionable salary is earlier than the last 12 months in post? Where in the scheme rules is this mentioned and defined? (Scheme II rules for Classic employed in 2001 at civilservicepensionscheme.org.uk/media/bwplniyb/scheme-rules-section-ii-1972-section-from-november-2016.pdf)

2)      In my case I am a deferred member due to leaving the civil service a significant period before I can claim Classic at or before NRA of 60. How exactly is the value at leaving uprated? I am particularly interested in the *last year/part year* before taking the pension. All of the available information relates to application of September CPI in the following April, but there is no information about *part* years. Again, references to scheme rules would be most helpful.

3)      The part-year issue is important as it seems that the scheme does not pay indexation increments for some of the year in which the pension is taken. Details of this seem not to be available beyond a simple statement that indexation is applied on the basis of *months of pension in payment*. I cannot find it in the scheme rules. What is the actual calculation used to determine entitlement to indexation uplift in the April following the retirement date? For example, if I retire on 20th July, what is the actual formula applied in April following using the annual CPI from September in the previous year? What is the justification or rationale for the application of only a partial uplift? Again, I cannot find any formal scheme rules reference to this, can you cite references to materials please?

4)      Tying together (3 and 4) above, is the final pensionable pay indexed from the date of leaving until the actual pension entitlement date? If so, on what basis is the calculation performed? If it is indexed only to the previous March, what is the justification for applying the *partial* indexation to the pension in payment in the year the pension is first paid.

These may seem to be absurdly detailed questions, but I believe, in periods of higher inflation they could make a very significant impact on the lifetime value of the pension, since first year increments last the lifetime of the pension in payment. For example, if my NRA is in July, I could bring it forward to April, and the actuarial reduction would be 4 months of c.5% per annum. If this resulted in the payment of the whole of September’s inflation figure of say 10% the following April, the pension as a whole would be higher, it would have been in payment for longer, and a higher base would be in place for future indexation.

The absence of real information from the Scheme and its agents is frustrating and hinders timely accurate decision making! Please assist. Thank you.