When to take civil service pension age 60 or 70

hardya

I have very little understanding of pensions and wonder if someone might be able to explain in general terms how to gather the information and understanding to make a decision when to take my civil service pension.

I was employed by the civil service 1981 - 1996 (15 years), type classic.  I am age 60 October 2022 and can take it then if I wish.

The benefits statement indicates an annual pension (15 x 1/80 of leaving sallary) at the date of leaving the scheme, 1996 and an annual pension value now in 2022 after (I guess 26 years of) benefits.  A quick online check suggests it has not kept up with inflation   First question is, is that normal and to be expected that it has not grown as much as I might have expected.

My main question however is above in general terms how to gather the information and understanding to make a decision when to take my civil service pension.  The organisation that administers the pension says I do not fit the criteria to phone them and when I ask by email they do not tell me.

In my very simple understanding, if I (for example) do not take my pension until age 70, I would...

a) Expect it to increase at least a little over the 10 years, maybe by inflation, because it is still invested.
b) ...but I would also expect it to increase for a different reason, surely if the same investment is going to be paid out over a shorter potential/average time period (you are older) then the annual amount should surely be more, I mean if (and only if you were allowed to and in theory) you waited till age 90 to take the investment as a pension the it's not going to pay for very long, right?

I need to understand how to balance taking nothing for 10 years and the potential/average loss so to speak that that represents against these two (I assume two) increases that will presumably ocurr if I take at age 70, but I am unable to get any information at all, however general, to make that decsion.

I'm just told - you can leave off till 70 if you want.  If that's an option then presumably there are 'potentially at least' good reasons.  I am working at the moment with a good income, but that on it's own cannot be a reason not to take my civil service pension.

Hope I am making sense.

Thanks 

Andrew

Albermarle

a) Expect it to increase at least a little over the 10 years, maybe by inflation, because it is still invested.

The Civil service pension is a ' Defined Benefit' scheme . It will pay a guaranteed income, based on your length of service and salary at the time. It is not invested or affected by financial market movements. It is one of the main reasons that a career in the Civil Service can be a good choice, as this guaranteed pension income is very valuable.

Other posters more familiar with the details of the scheme will no doubt explain your options in more detail, but I thought it was worth pointing this basic fact out.

molerat

A quick online check suggests it has not kept up with inflation

How do you figure that one out ?  The pension has an inflation linked increase every year and there is a table produced to calculate how that increase is applied to the original amount https://www.gov.uk/government/publications/public-service-pensions-increase-2022

Delaying taking the pension beyond the normal retirement age does not offer any increase in value apart from the normal annual inflationary increase.

Not sure what happens to the unclaimed pension amount.

hardya

Thank you for the information, really appreciate it.  I just used a simple online inflation calculator, I guess it must use a different system or be poor or limited.

My main question was bout whether to take the pension at 60 or 70 (as offered).  So far I can see no reason not to take it at 60, which makes me wonder why they would offer you to deffer it.  Odd.  But I am very inexperienced in these matters.

molerat

When I worked out my AFPS age 55 pension amount after 15 years using a spreadsheet and the published September figures it was £18 pa different from the actual and I worked out that was because the first year I used the full increase when it should have been partial and that compounded over the 15 years.

The only reason I can see for not taking it would be to avoid paying higher / additional rate tax but that can usually be negated by paying into a pension.

hyubh

hardya said:

A quick online check suggests it has not kept up with inflation

That won't be true, as a public sector pension it will have increased by RPI until 2011, then CPI thereafter. It will continue to increase the same way in payment. (Well, with a slight kink for your likely 'GMP' - complex issue, but basically you can forget about it, given your age.)

My main question however is above in general terms how to gather the information and understanding to make a decision when to take my civil service pension.

There will be no benefit to delay drawing a Classic pension until some time after normal pension age (60), since there won't be a late retirement uplift due (see below).

In my very simple understanding, if I (for example) do not take my pension until age 70, I would...
a) Expect it to increase at least a little over the 10 years, maybe by inflation, because it is still invested.

That's a misunderstanding, your civil service pension is a 'defined benefit' pension that pays out a sum according to scheme rules. Even if there were an investment fund behind the scheme (like, say, the DB pension scheme for MPs), the success or otherwise of those investments would have no bearing on what you get.

b) ...but I would also expect it to increase for a different reason, surely if the same investment is going to be paid out over a shorter potential/average time period (you are older) then the annual amount should surely be more, I mean if (and only if you were allowed to and in theory) you waited till age 90 to take the investment as a pension the it's not going to pay for very long, right?

In newer sections of the civil service scheme there is the concept of 'late retirement factors', which is the DB equivalent of this. But, as mentioned, Classic doesn't have this. (Also: newer sections of the scheme that do late retirement uplifts also have higher normal pension ages in the first place.)

I'm just told - you can leave off till 70 if you want.  If that's an option then presumably there are 'potentially at least' good reasons. 

Hmm, I wouldn't assume any general 'good reasons'...

bluenose1

No financial advantage / gain to not taking classic civil service pension after 60.
As molerat says just  need to consider if you would be paying higher rate tax on it and if so open a SIPP to keep below.

hardya

Thank you all so much, I really appreciat the clear and substantial explanations.

Again excuse my ignorance, but could I perhaps increase the pension payments on my current automatic work place pension with Standard Life paid in my current full time employment by the amount of my gross monthly pension and there by get tax releief on it roughly equivelant to the tax I will be paying on my civil service pension.

Or do I set set up a separate personal pension that somehow gets paid straight out of my monthly civil service pension and there by pay in the gross monthly amount of the pension since it will be freed of tax?

Dazed_and_C0nfused

hardya said:

Thank you all so much, I really appreciat the clear and substantial explanations.

Again excuse my ignorance, but could I perhaps increase the pension payments on my current automatic work place pension with Standard Life paid in my current full time employment by the amount of my gross monthly pension and there by get tax releief on it roughly equivelant to the tax I will be paying on my civil service pension.

Will this pension make you a higher rate taxpayer?

Or do I set set up a separate personal pension that somehow gets paid straight out of my monthly civil service pension and there by pay in the gross monthly amount of the pension since it will be freed of tax?

That isn't possible.

Albermarle

Or do I set set up a separate personal pension that somehow gets paid straight out of my monthly civil service pension and there by pay in the gross monthly amount of the pension since it will be freed of tax?

There would be no specific advantage between increasing contributions to your current workplace pension, or adding them to a separate pension instead. Unless your current workplace contributions are made via salary sacrifice. In this case better to just contribute more to that. In any case, as your knowledge of pensions and investing seems limited, then probably best to stick with your workplace pension.

Probably a good idea to educate yourself about pensions more, as decisions will also have to be taken at some point about your current workplace pension. These sites can be a good start.

Pensions: Everything you need to know for retirement - MSE (moneysavingexpert.com)

Pensions and retirement | Help with pensions and retirement | MoneyHelper

OldBeanz

hardya said:

Thank you for the information, really appreciate it.  I just used a simple online inflation calculator, I guess it must use a different system or be poor or limited.

My main question was bout whether to take the pension at 60 or 70 (as offered).  So far I can see no reason not to take it at 60, which makes me wonder why they would offer you to deffer it.  Odd.  But I am very inexperienced in these matters.

Apply for your CS Pension today. They ask for 4 months notice. They will back date it.
https://www.civilservicepensionscheme.org.uk/media/rtrl0rfj/change-of-details-and-retirement-application-form-deferred-members-february-2020.pdf