CIVIL SERVICE CLASSIC / ALPHA ADVICE

Hamster19655

Good morning

 

I have been amazed with the knowledge and help that people have given/shown on the website.

Just wondering if someone could help me with some points regarding my pension. I have had limited success with answers from MYCSP and zero from my own Pay section.

Situation: I currently have 39 years service (40 years in August 2023). I am hoping to retire sometime in the next 6 months. I am currently 58 but intend to defer my pension until I am 60 in Jan 2025. I have some savings that I can survive on until then.

My pension is made up of classic until 2014 when everyone was moved onto Alpha. Obviously this will be rectified with the McCloud remedy. I am aware that everyone is on Alpha since February/March 2022.

I was seeking some help with the following points.

1: If I defer my pension now (December 2022), will it be subject to the CPI rise in April 2023 based on September 2022 CPI figures. Would this be the sensible way to do things as I want to retire in May 2023 at the latest? I am thinking of gains in terms of my lump sum.

2: What way if any does an existing ‘live’ pension be affected, if at all, by the CPI increase in April 2023.

3: Generally what way are current pensions impacted by the current high CPI.

4: Is there a best time of year that you are better starting to draw on your pension in terms of financial advantage. I am thinking about in the future when I would draw my pension.

5: Somebody mentioned to me that there is an ongoing court case/dispute regarding existing Classic Civil Servants being moved to Alpha in early 2022. As Alpha is career average and not final salary this will affect me as it will plenty of others as I have received a £2000 pay rise in the last few months which under Classic would mean a £1000 increase in pension at maximum 40/80 pension. Does anyone have any information about this dispute?

 

Thank you in advance for any advice in relation to the above and for any other knowledge in relation Civil Service pensions to someone about to retire.

 

Thanks in advance

T

 

horsewithnoname

You only get the April CPI increase pro rata, so for instance when I PR’D in Feb 21, I got c2 months worth of the April increase. 

You might want to think about deferring it. After the April 23 increase I’ll be better off than if I’d waited the two years till I was 60 because of inflation being so much more than any pay increase (well, inflation mitigation at least😬)

your reckonable service for classic will not increase post April 22, but your salary of reference will be as previously based on your best 12 of the last 36 months, so any pay increase will be taken into account in calculating your pension. 

As for the other questions I don’t know. 

Hamster19655

Thanks Horse for the reply. 

Regarding the deferring of my pension, I was more concerned about the financial benefits of a 10% CPI impact on my lump sum which I presume would be taken into consideration as well.

Re the pay increase. I got an increase around Jun 2022 when my pension had changed over to Alpha (March 2022 or thereabouts) so this will not be taken into account with my Classic pension as far as I am aware. I think the last three years for the Classic part of my pension will be the three years prior to the change to Alpha...if that makes sense. 

horsewithnoname

No, it is based on your final salary, ie when you retire, not when you were put into Alpha. 

I went into Alpha August 2020, and when I pr’d in Feb 2021, it was based on my salary to January 2021 (as my best year)

I’m not sure about CPI and deferral, sorry

Hamster19655

horsewithnoname said:

No, it is based on your final salary, ie when you retire, not when you were put into Alpha. 

I went into Alpha August 2020, and when I pr’d in Feb 2021, it was based on my salary to January 2021 (as my best year)

I’m not sure about CPI and deferral, sorry

Thank you...that is good to know....

hugheskevi

My pension is made up of classic until 2014 when everyone was moved onto Alpha. Obviously this will be rectified with the McCloud remedy. I am aware that everyone is on Alpha since February/March 2022.

The exact dates were 1 April 2015 and 1 April 2022, and not everyone was moved to alpha on 1 April 2015.

1: If I defer my pension now (December 2022), will it be subject to the CPI rise in April 2023 based on September 2022 CPI figures. Would this be the sensible way to do things as I want to retire in May 2023 at the latest? I am thinking of gains in terms of my lump sum.

If you defer now your pension is calculated as at date of leaving and receives CPI increases from that point forward. Hence the first year would be a partial  increase, reflecting the period between December 2022 and 1 April 2022.

2: What way if any does an existing ‘live’ pension be affected, if at all, by the CPI increase in April 2023.

Each of the legacy schemes are different and in particular the Premium scheme would effectively operate with a CPI underpin in most cases due to rules about calculation of final pensionable earnings. In the case of classic, it is not affected unless your final pensionable earnings decrease (fairly rare - it has to be the amount paid, not a change of hours, so is usually a change in pensionable allowances or suchlike).

3: Generally what way are current pensions impacted by the current high CPI.

Adversely. In the case of Civil Service though, classic is likely to lose real value unless there is a big increase, Premium will probably retain value although it depends on individual circumstances and past pension history, nuvos will receive full CPI uplift, as will alpha. So it is only likely to be classic that loses a lot of value due to inflation exceeding salary growth.

4: Is there a best time of year that you are better starting to draw on your pension in terms of financial advantage. I am thinking about in the future when I would draw my pension.

It is probably most important to ensure you use taxable allowances efficiently each year. Pension is revalued by CPI up to the time you draw it, and by CPI after you take it, so it shouldn't make much difference.

5: Somebody mentioned to me that there is an ongoing court case/dispute regarding existing Classic Civil Servants being moved to Alpha in early 2022. As Alpha is career average and not final salary this will affect me as it will plenty of others as I have received a £2000 pay rise in the last few months which under Classic would mean a £1000 increase in pension at maximum 40/80 pension. Does anyone have any information about this dispute?

I do not believe there is any case.

horsewithnoname

The Classic pension has lost about 20% since 2010, because pay has been cut in real terms. And that’s before this year’s inflation. 

Certainly if you are 60 you need to consider taking at least your Classic before inflation erodes it further- unless you are optimistic about getting a pay rise or a promotion 

Hamster19655

Thank you Horse

My plans with being 58 in Jan 2023 is to leave work around May/June 2023 (40 years service in August), defer my pension until I am 60. I have enough savings etc to bide me over until then. No signs of any imminent pay increases or promotions before that time...which is only a few months. I had been wishing/praying for some form of early exit scheme which although the 91000 number is scrapped, I have heard there may be some form of scheme in the New Year (Civil Service wide). 

hugheskevi

horsewithnoname said:

The Classic pension has lost about 20% since 2010, because pay has been cut in real terms. And that’s before this year’s inflation. 

Certainly if you are 60 you need to consider taking at least your Classic before inflation erodes it further- unless you are optimistic about getting a pay rise or a promotion 

For those some way from retirement, it is worth knowing that switching to Partnership creates a deferred Classic award, which increases in line with CPI from point of deferment. 

When earnings are increasing by less than prices it is not uncommon for members to have a higher classic pension based on a year or two of deferment than they would have had if they had remained in the scheme paying contributions.

Leaving a DB scheme for a DC scheme is a major financial decision, but it is worth considering.

westv

hugheskevi said:

horsewithnoname said:

The Classic pension has lost about 20% since 2010, because pay has been cut in real terms. And that’s before this year’s inflation. 

Certainly if you are 60 you need to consider taking at least your Classic before inflation erodes it further- unless you are optimistic about getting a pay rise or a promotion 

For those some way from retirement, it is worth knowing that switching to Partnership creates a deferred Classic award, which increases in line with CPI from point of deferment. 

When earnings are increasing by less than prices it is not uncommon for members to have a higher classic pension based on a year or two of deferment than they would have had if they had remained in the scheme paying contributions.

Leaving a DB scheme for a DC scheme is a major financial decision, but it is worth considering.

Does that mean switching out of Alpha though? Classic will already be deferred for a lot.

Hamster19655

Good pint westv.....and thanks hugh

It might sound a stupid question but presuming as anyone on classic went into alpha in April 2022 (ignoring the Mcloud) situation at the minute. What happens to any Classic pension pre April 2022. Does that just get CPI index linked? I would imagine it has to keep up with something.

Just another question and sorry again if it is a stupid one...I cant seem to get the answer anywhere. If I transferred to Alpha in April 2022 (ie by force :-)), then retire in say May 2023, will my classic pension with being based on the best of the last three years including the last three years before retirement i.e. from May 2020 up to May 2023 including say a high year even though I was in Alpha and not Classic. Hope that make sense. :-) My highest year will have been from May 2022 to May 2023 by a couple of thousand.