Classic Civil Service Pension: Pension Payable Calculation

swanny65

Hi
I have decided to retire at 59 and take my Civil Service Pension - the vast majority will be from the Classic scheme, post the McCloud judgment. I will also get added a small Alpha pension entitlement but, unless I have missed anything, please ignore that as part of this question.

I understand that my pensionable earnings are a period of a year's earnings over the three years before my last day of service. Stepped back in 91 day periods.

With inflation-linked pension increases last year (and likely this as well) far outpacing Civil Service pay I am keen to understand whether my pensionable earnings will be taken using an earlier year and adjusted for inflation or will it be the last year's salary as almost certainly that will be the highest earnings.

Frustratingly I could not get an answer to this question from the providers when I joined their pension sessions. It would be helpful to know now in case there is anything I can do pre-retirement to boost my pension.

My situation is:
Joined Civil Service: 17/12/1984
Planned retirement date/last day of service: 30/06/2024 
Earnings for tax year ending 2021: £43500
Earnings for tax year ending 2022: £50000 
Earnings for tax year ending 2023: £59500
Earnings for tax year ending 2024: £61000 

Fortunately, I was temporarily promoted to a higher grade in Dec 2021 and the above figures reflect this. My temporary promotion will greatly boost my pension and has allowed me to leave a year earlier than planned which is excellent.

I believe if the period 0101/2022 to 31/12/2022 was taken as my pensionable earnings period, the result pension calculated from earnings of about £59000 with inflation-related increases then applied up to my last day of service, would exceed taking my current (final year) projected earnings of £61000 for the period 01/07/2023 to 30/06/2024 with my pension then calculated accordingly.

Does anyone know if this retrospective "inflation proofing" happens or will my last year's earnings be used as they are the highest earnings? 

Thanks very much

Dazed_and_C0nfused

This is from a previous thread 

©@hugheskevi

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.

swanny65

Thank you.

So the "best" I can do now, is to decline my temporary promotion from 01/01/24 and revert to my substantive salary band. Then in all likelihood, 01/01/23 to 31/12/23 would be my highest figure and I would get a small CPI increase from 01/01/24 - possibly 2% pro rata if CPI is 8%

I need to look at my payslips and see whether this is worthwhile.

Thanks again

hugheskevi

swanny65 said:

So the "best" I can do now, is to decline my temporary promotion from 01/01/24 and revert to my substantive salary band. Then in all likelihood, 01/01/23 to 31/12/23 would be my highest figure and I would get a small CPI increase from 01/01/24 - possibly 2% pro rata if CPI is 8%

You should also consider switching to Partnership, which means you leave the classic scheme and a deferred award is calculated at the point you exit the scheme. You could also just opt-out of the scheme to lock-in the higher pension, if you think you need to do that ASAP.

swanny65

hugheskevi said:

swanny65 said:

So the "best" I can do now, is to decline my temporary promotion from 01/01/24 and revert to my substantive salary band. Then in all likelihood, 01/01/23 to 31/12/23 would be my highest figure and I would get a small CPI increase from 01/01/24 - possibly 2% pro rata if CPI is 8%

You should also consider switching to Partnership, which means you leave the classic scheme and a deferred award is calculated at the point you exit the scheme. You could also just opt-out of the scheme to lock-in the higher pension, if you think you need to do that ASAP.

Thanks also for your help and advice.

I have had a closer look at my salary. I got a bonus on 31/03/23 and I also had a week's leave paid as salary, on 28/02/23. 

My salary increased to £59529 pa on 01/08/22 and then to £60920 pa on 01/08/23.

Excluding my bonus and leave payment, as I doubt these are pensionable, if the CPI increase in April 24 is 8% then the pro-rata increase on my base pensionable salary would exceed my current salary £59529 x 4% = £2381 + £59529 = £61910. So it seems I would be foolish not to move my pension. 

I have paid into the CSAVC scheme for many years. Would my AVC have to stop if I joined the partnership scheme?

Finally, can I apply retrospectively to join partnership, say from 01/04/23?

Thanks again 

hugheskevi

swanny65 said:

I have paid into the CSAVC scheme for many years. Would my AVC have to stop if I joined the partnership scheme?

Probably, although the link to the main scheme benefits is extremely weak but even so, I think the payroll processes wouldn't permit it. You may be able to pay contributions directly to the provider though (although then you would have to reclaim all the tax relief, which would be a painful process with HMRC).

But for the sums involved over such a short timescale, you could just set the Partnership contribution rate higher and achieve much the same effect, especially if your asset allocation decision is set to match the AVC.

swanny65 said:

Finally, can I apply retrospectively to join partnership, say from 01/04/23?

No.