Civil Service Pension vs Partnership - partial retirement. 9 February at 2:11PM edited 9 February at 2:15PM in Pensions, annuities & retirement planning 5 replies 261 views

SANDS09

Forgive me but new to this forum and to asking for assistance - I have been advised that someone will recognise the situation I am referring to?
Also sorry that this is a long post. 

I am a life-long civil servant - started back in 1984 and in April I will turn 60. 
Throughout that time I have paid into a pension. 
In something like 2015 or so the Govt. changed the civil service pension scheme to end the 'Classic' scheme and introduced the Alpha scheme - there was a tapered introduction and, because of my age, I did not move over the the Alpha scheme until February 2020. Shortly after Feb 2020, 'based on the information at the time' I decided to move over to the Partnership Scheme as I understood that that element could be drawn down on before my 67th birthday without penalty and yet and Alpha pension payments could not be drawn upon until I reached 67, without penalty. 
Subsequently - the Govt. action was deemed to be illegal - this giving rise to the McCloud remedy. 

I have just applied to be partially retired, starting on my 60th Birthday (a thing a lot of my colleagues in the past have done) However, I have been advised that I am not eligible for partial retirement as I am not an active civil service pension member. 

Our pension administrator, Civil Service Pensions (CSP), seem to be at the extreme end of unhelpful, either through inexperience or unwillingness?

All I want to know is:

If I can't go partially retired, presumably I can claim my full Classic Pension at 60 and work part-time - and will this be practically the same?

I understand that my Pension amount will be based on my salary as at the point I left the CSP i.e. 2019/2020 - but presumably this will receive the CPI uplift for the intervening years - so y pension will be based on my salary in 2020 plus CPI for 2021, 2022 & 2023? 

I know there is a rule that my pension plus any part time earnings from the civil service, cannot exceed my 'current' salary but CSP told me that my pension plus earnings cannot exceed my salary - at the time I left the CSP i.e. 2020 without any CPI uplift (though the call handler did confess he wasn't 100% sure about that).

Which is it?

I know that I can re-join the CSP - but will this make any practical difference? 

And finally - will my situation be covered by the McCloud judgement as I 'chose' to leave the CSP ....even though that was based on a decision made by the Govt. that was judged to be illegal? I suspect the answer to that will be - wait until October 2023...but it is doubtful. 

I feel that the decision I took to move in 2020 will now have a significant impact on what I can earn and what pension I receive and I am struggling to see a way around these apparent obstacles. 

Any advice gratefully received. 

 
  

hugheskevi

I am a life-long civil servant - started back in 1984 and in April I will turn 60. 

If you want to start receiving your pension in April 2023 it is already very late for submitting the application (ideally you would do it 4 months in advance).

In something like 2015 or so the Govt. changed the civil service pension scheme to end the 'Classic' scheme and introduced the Alpha scheme - there was a tapered introduction and, because of my age, I did not move over the the Alpha scheme until February 2020. Shortly after Feb 2020, 'based on the information at the time' I decided to move over to the Partnership Scheme as I understood that that element could be drawn down on before my 67th birthday without penalty and yet and Alpha pension payments could not be drawn upon until I reached 67, without penalty. 

You may wish to consider making a 'contingent decision' argument that you would not have switched to Partnership had it not been for the switch to alpha.

If I can't go partially retired, presumably I can claim my full Classic Pension at 60 and work part-time - and will this be practically the same?

As long as you reach age 60 as a deferred member of classic you can claim the full pension and continue to work full time as abatement would not apply.

I understand that my Pension amount will be based on my salary as at the point I left the CSP i.e. 2019/2020 - but presumably this will receive the CPI uplift for the intervening years - so y pension will be based on my salary in 2020 plus CPI for 2021, 2022 & 2023? 

Not quite - your pension award is calculated at the point of deferment based on your final salary at that time. Then the pension award is increased in line with CPI. But the effect is exactly the same.

And finally - will my situation be covered by the McCloud judgement as I 'chose' to leave the CSP ....even though that was based on a decision made by the Govt. that was judged to be illegal? I suspect the answer to that will be - wait until October 2023...but it is doubtful. 

Yes. The default position is you will get a choice of schemes for the period up until you left. But you can put forward a contingent decision to change that.

njtt

"As long as you reach age 60 as a deferred member of classic you can claim the full pension and continue to work full time as abatement would not apply."

Can I check my understanding of this? I thought that abatement would apply if you choose to receive your pension at the same time as full time earnings (ie it is no longer deferred because you are claiming it).

But, if you choose to continue to work and not to take the pension but allow it to continue to be deferred, it will then buiild up and you can take it unreduced in future (but may have to pay extra tax because you'll get it in 'one go' in the tax year you claim it.)

Have I got that right?

Dazed_and_C0nfused

njtt said:

"As long as you reach age 60 as a deferred member of classic you can claim the full pension and continue to work full time as abatement would not apply."

Can I check my understanding of this? I thought that abatement would apply if you choose to receive your pension at the same time as full time earnings (ie it is no longer deferred because you are claiming it).

But, if you choose to continue to work and not to take the pension but allow it to continue to be deferred, it will then buiild up and you can take it unreduced in future (but may have to pay extra tax because you'll get it in 'one go' in the tax year you claim it.)

Have I got that right?

Do you know for a fact that someone who deliberately chooses to not commence their Classic pension will be paid a lump sum of the amounts foregone?

Say it's £10,000/year and NPA is 60.

They commence Classic at age 67, by which time the annual pension has grown to say £11,700.

They will be paid £11,700/year from then on. 

But what do you think happens to the ~£75k or so they chose not to be paid between age 60 and 67?

hugheskevi

njtt said:

"As long as you reach age 60 as a deferred member of classic you can claim the full pension and continue to work full time as abatement would not apply."

Can I check my understanding of this? I thought that abatement would apply if you choose to receive your pension at the same time as full time earnings (ie it is no longer deferred because you are claiming it).

That is the policy intent, but not the drafting of the scheme rules. See rule 3.26 of the classic rules. This is the main rule dealing with abatement. As someone who simply opts out of the scheme (either leaving in full, or joining Partnership) is not re-employed, this rule does not apply.

But, if you choose to continue to work and not to take the pension but allow it to continue to be deferred, it will then buiild up and you can take it unreduced in future (but may have to pay extra tax because you'll get it in 'one go' in the tax year you claim it.)

As long as it was deferred at the point you reached age 60, ie, you had left alpha, then this is an option. You may also be able to reclaim tax paid in 'one go' as the payments would have been due for an earlier period, although I'm not 100% sure about that.

If however you reach age 60 and are still an active member of alpha at that time, no arrears would be paid.

njtt

Thanks hugheskevi,

I see - very helpful. So the key thing is that the rules expressly refer to 're-employment' and so do not cover continuation of employment. I can see that based on the wording here.

Does that not mean that the published page on abatement is inaccurate and misleading (link below). This says:

"If you:

• take partial retirement
• are retired and receiving a Civil Service Pension, or
• have taken an annual compensation payment

and continue to work for, or are re-employed by a Civil Service employer, your combined salary and pension cannot be more than you were earning before you retired."

They seem to have added a "continue to work" element that is not in the actual scheme rules.

Is that your understanding, or is there some nuance I am missing?

https://www.civilservicepensionscheme.org.uk/planning-for-retirement/what-are-my-options/partial-retirement/abatement/