Rules relating to inflation indexation of the 'Classic' Civil Service Pension Scheme

mp11

My questions, concerning the Civil Service Pension Scheme, Classic:

1)      Concerning indexation of the deemed final pensionable pay: a previous 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 which is 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.

 (I have also posted these questions against the relevant older thread, but as they extend beyond the scope of that thread, I believe it is appropriate to start a new thread so others experiencing similar problems with the Civil Service Pension Schemes can more easily see the materials. Thank you.) 

Marcon

mp11 said:

My questions, concerning the Civil Service Pension Scheme, Classic:

1)      Concerning indexation of the deemed final pensionable pay: a previous 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 which is 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.

 (I have also posted these questions against the relevant older thread, but as they extend beyond the scope of that thread, I believe it is appropriate to start a new thread so others experiencing similar problems with the Civil Service Pension Schemes can more easily see the materials. Thank you.) 

If you've already tried and failed to get the information from the scheme administrators, try this route: https://www.civilservicepensionscheme.org.uk/about-us/complaints/internal-dispute-resolution-idr/

OldBeanz

I turned 60 in 2015 but worked on until days after my 61st birthday. My pension was based on my 2007 salary so the oft quoted phrase of pay not being increased in line with inflation since 2010 ignores the last 3 years of the Labour Government.
My wife a deferred employee (short term, low grade) who retired last year in May received an extra £200 in April which was an inflation re-adjustment. 
Don't think it is worth deviating from drawing at 60 unless you really need the money and I have not heard an argument on here that deviates from that.

GunJack

I've been keeping an eye on mine since deferring in 2007, and it increases at CPI (used to be RPI many moons ago) every year (i.e. Sep CPI is applied the following April). When I asked MyCSP for a full valuation a couple of years ago, the value had increased from time of leaving in line with CPI since I left to within a couple of decimal rounding pence o0f what I calculated it should be... oh, and if you leave partway through a year you get a pro-rata increase in that year, same as if you put it into payment partway through.

hyubh

These may seem to be absurdly detailed questions

Not really, were MyCSP to lose their contract, these are the sorts of question a new administrator would be asking!

Ignoring GMP complications, public sector pensions increase from leaving (or an earlier date depending on protected final pay mechanisms). As such there is no concept of 'revaluation' apart from 'pension increases' (a distinction that is, conversely, common in private sector DB pensions). The first increase is pro-rated for the part year (*); after that, you get full increases. As such, where date of leaving is at least two pensions increase dates prior to retirement, it doesn't matter when you retire (in the DB pensions sense of 'draw your benefits') - the increase prior to retirement will be a full one. In the case of an early retirement, the actuarial reduction is then applied to the pension increased to DOR.

(*) The Pension Increase (Review) Order for each year contains an account of how the pro-rating is done exactly: https://www.legislation.gov.uk/uksi/2023/338/made

sammyjammy

hyubh said:

Not really, were MyCSP to lose their contract, these are the sorts of question a new administrator would be asking!

We can only dream