Civil Service Premium Pension - take at 60 or wait till end of scheme year?

hugheskevi

Kingswood12345 said:

Hi - sorry to piggy back on this exchange, but I have a related question following an exchange with MyCSP.

I am planning to take early retirement in 2024-25. MyCSP has told me that under the 13 year rule mentioned above my best years are 2015-16 to 2017-18. I don't disagree but don't understand the factors they are using to revalue these years.   

For example, for 2016-17 pensionable earnings it looks like MyCSP are using CPI at Sept 2016 (which makes sense) and CPI at Sept 2022 (which doesn't make sense to me). As I will be partially retiring in 2024-25, I had expected 2016-17 pensionable earnings to be revalued to 2023-24 prices by MyCSP using CPI at Sept 2016 and Sept 2023 (not Sept 2022).  At a time of high inflation, missing a year of uplift has a material impact. 

Does anyone know if this is an error in my understanding of the scheme or MyCSP making an error. Many thanks. 

Revaluation is done by application of the CPI figures used for annual pension increases, which are based on the September CPI figure.

Set out the pensionable earnings in each previous complete scheme year. 2024/25 is not a complete scheme year, so the most recent complete scheme year is 2023/24. This is not revalued at all, so the inflation-adjusted pensionable earnings for 2023/24 is just pensionable earnings from 2023/24.

2022/23 is adjusted by the most recent pension increase, which is 6.7% based on September 2023 CPI.
2021/22 is adjusted by September 22 CPI which was 10.1% and also by 6.7% (compounded). 

And so on for each previous year.

The 2015/16 pensionable earnings should be increased by 31.9%, 2016/17 by 30.6% and 2017/18 by 26.8%.

Kingswood12345

That's great - many thanks hugheskevi

My calculations gave me the same values you set out. 

MyCSP are using lower ones - for example 22.37% for 2016-17 as I think they are using the CPI index at Sept 2016 (101.1) and the CPI index at Sept 2022 (123.8). I'll ask them again why they are not using the CPI index for Sept 2023 (132.0).

Thanks again 

atalantalass

Belatedly I'm hoping to piggyback on this too but I fear my knowledge is insufficient to even be sure I'm asking the correct questions.
I reach 60 in December 2026 and had always planned not to work beyond that date. However I'm now trying to double-check how worthwhile financially it is to stay on until then. I'm a bit confused by the countback exercise to calculate final pensionable earnings.
After rollback into the legacy scheme, all my service until 31 March 2022 is in classic plus.
Q. Am I correct in thinking that the 13-year old year doesn't apply to me? And that the pensionable earnings figure used will be either my last 12 months of service or the highest 12-month period within the last four complete scheme years?
Q. A scheme year is the same as the tax year?
Q. When looking back at the last 4 complete years, the pension administrators will adjust using the CPI index, yes? And those are the figures in the table earlier in this thread?
Apologies if these seem very basic questions, I find it all quite difficult to get my head around. 
     

hugheskevi

After rollback into the legacy scheme, all my service until 31 March 2022 is in classic plus.

Q. Am I correct in thinking that the 13-year old year doesn't apply to me? And that the pensionable earnings figure used will be either my last 12 months of service or the highest 12-month period within the last four complete scheme years?  

Classic Plus also includes the highest average pensionable earnings in any period of three complete scheme years during the last 13 years ending on your last day of service leg of calculating final pensionable earnings.

Q. A scheme year is the same as the tax year?    

No. A scheme year is 1st April to 31st March.

Q. When looking back at the last 4 complete years, the pension administrators will adjust using the CPI index, yes? And those are the figures in the table earlier in this thread?     

The most recent complete scheme year is not adjusted. Adjustments apply from the year before the most recent complete scheme year.

atalantalass

hugheskevi said:

After rollback into the legacy scheme, all my service until 31 March 2022 is in classic plus.

Q. Am I correct in thinking that the 13-year old year doesn't apply to me? And that the pensionable earnings figure used will be either my last 12 months of service or the highest 12-month period within the last four complete scheme years?  

Classic Plus also includes the highest average pensionable earnings in any period of three complete scheme years during the last 13 years ending on your last day of service leg of calculating final pensionable earnings.

Q. A scheme year is the same as the tax year?    

No. A scheme year is 1st April to 31st March.

Q. When looking back at the last 4 complete years, the pension administrators will adjust using the CPI index, yes? And those are the figures in the table earlier in this thread?     

The most recent complete scheme year is not adjusted. Adjustments apply from the year before the most recent complete scheme year.

I really appreciate you replying. I've seen your contributions in various threads and they have been extremely helpful. I think what's bothering me is I've seen references to people having found mistakes in calculations etc and I'm not sure what I should be looking out for / focusing on. With my current knowledge, I don't really feel in a position to do checks  or form a view on what it might financially to, for example, finish up mid way through the year in the run up to my 60th. Do you have any insight into the sorts of issues that are causing the most problems or being the subject of challenge or the sorts of things I should be thinking about. It's difficult to know where to go to get advice. I've seen others say that the modeller doesn't seem to be giving them accurate figures and that worries me too - that the figures might be way off.

hugheskevi

Do you have any insight into the sorts of issues that are causing the most problems or being the subject of challenge or the sorts of things I should be thinking about. 

The biggest financial mistakes are made by those aged 60+. Significant loss can be made by those approaching age 60. So learn in detail about the scheme from about age 55.

But if you are going to learn about scheme is detail at age 55, you may as well do it ASAP. The gains of specific knowledge about the Civil Service scheme will be much lower when young, but the gains from understanding pensions more widely will be greater, particularly when compounded over time.

Pensions are the second best form of tax avoidance, it pays to have good knowledge of them from an early age.

Cooze694

Hi Sorry to add to this to, I am so confused.
I am in the premium pension with 19 years 172 days I reach 60 in September 2025, I have never though of taking my pension partial at 60 has I used to love my job, oh how things have changed.

After doing some research I found that my not taking my premium pension at 60 I am not doing myself any favours, 
I would lose out, I got promoted finally to an EO 17 months ago so I presume that my final salary would be worked out on that pay. 

I wanted to ask if I took partial retirement, 2 months before my 60th would I lose out on much money ? 

I thought about taking 17% of the lump sum, only because my pension is small has I was an AO for the majority of it and feel it's better to have more money a month, I want to pay my morgage off with the lump sum and some debt. 

Also I moved into the premium pension and has I only been employed for a very short time they converted all my classic pension into premium, the problem is now they have my start date at joining the civil service at that date, so I have not received my 25 year bonus, how can I check this and get it changed and will this affect my premium pension.

I would appreciate any advice has I am on my own and struggling.

Thank you 

hugheskevi

I am in the premium pension with 19 years 172 days I reach 60 in September 2025, I have never though of taking my pension partial at 60 has I used to love my job, oh how things have changed.

Assuming you are a Civil Servant, you have been in the alpha scheme since 1 April 2022.

I would lose out, I got promoted finally to an EO 17 months ago so I presume that my final salary would be worked out on that pay. 

There is every chance that your inflation-adjusted AO (presumably) salary from years earlier would be higher than your EO salary, due to pay freezes/pauses/restraint.

I wanted to ask if I took partial retirement, 2 months before my 60th would I lose out on much money ? 

No, just a very small reduction.

I thought about taking 17% of the lump sum, only because my pension is small has I was an AO for the majority of it and feel it's better to have more money a month, I want to pay my morgage off with the lump sum and some debt. 

This would be a far more damaging action than taking the pension 2 months early. You exchange £1 of taxable pension for £12 of lump sum. Assuming you are a basic rate taxpayer, it will take 15 years of pension to equal the amount received from the lump sum after tax, ie when you are about age 75 (ignoring inflation uplift of pension, and returns from lump sum). Your life expectancy is 85-90 years so you are only getting about half the value from the lump sum option.

Also I moved into the premium pension and as I only been employed for a very short time they converted all my classic pension into premium, the problem is now they have my start date at joining the civil service at that date, so I have not received my 25 year bonus, how can I check this and get it changed and will this affect my premium pension.

Are you referring to the 2002 options exercise? In which case, you voluntarily chose to convert your classic pension into a premium pension, which was a good choice.

Who is 'they?' The entities involved are your payroll provider and MyCSP. Both have different records. Ideally the information both hold and display would be the same and correct, but that is commonly not the case. Even if you were to inform one or the other it is unlikely anything would change, there are plenty of known errors.

It only affects your premium pension if your recorded years of service held by MyCSP is inaccurate. You say you have 19 years 172 days of reckonable service from date of joining to 31 March 2022 - is that figure correct and shown on your latest Annual Benefit Statement? If so, your premium pension will be calculated correctly when you take your pension.

As for 25 year bonus, you can evidence start date with past payslips, P60s, perhaps old Annual Benefit Statements, etc. MyCSP will have old records, but extracting them from MyCSP would probably be difficult and time-consuming. If you have never changed employer, your payroll provider should also have records.

atalantalass

hugheskevi said:

Do you have any insight into the sorts of issues that are causing the most problems or being the subject of challenge or the sorts of things I should be thinking about. 

The biggest financial mistakes are made by those aged 60+. Significant loss can be made by those approaching age 60. So learn in detail about the scheme from about age 55.

But if you are going to learn about scheme is detail at age 55, you may as well do it ASAP. The gains of specific knowledge about the Civil Service scheme will be much lower when young, but the gains from understanding pensions more widely will be greater, particularly when compounded over time.

Pensions are the second best form of tax avoidance, it pays to have good knowledge of them from an early age.

It certainly does. Other than coming on here and picking your brain I don't know where else to find answers. My understanding is getting there now thanks to your posts and I am very grateful to you and others on here. If I retire in October 2026, for the purposes of calculating pensionable pay, are the last four complete scheme years the four full years immediately preceding that year, not counting the partial year? So that would be the years ending March 31, 2022, 2023, 2024, and 2025. In which case the 2022 high CPI is included? Or would it be 2023, 2024, 2025 and 2026? If the latter, do I need to think about retiring before 31 March 2026 to ensure I don't lose the benefit of the 2022 high inflation uplift?        

hugheskevi

atalantalass said:

If I retire in October 2026, for the purposes of calculating pensionable pay, are the last four complete scheme years the four full years immediately preceding that year, not counting the partial year? So that would be the years ending March 31, 2022, 2023, 2024, and 2025. In which case the 2022 high CPI is included? Or would it be 2023, 2024, 2025 and 2026? If the latter, do I need to think about retiring before 31 March 2026 to ensure I don't lose the benefit of the 2022 high inflation uplift?        

The scheme years runs from 1 April to 31 March, so the last 4 complete years if leaving in October 2026 would be 2025/26, 2024/25, 2023/24 and 2022/23.

There is also the measure of the highest average pensionable earnings in any period of three complete scheme years during the last 13 years ending on your last day of service. There is often little difference between that measure and the best year in the last 4 years, so you should calculate both to inform your decision about when to leave the scheme.

Note that switching to Partnership achieves the same effect as retiring in terms of locking in a higher past salary.