Deferred Civil Service Pension

uknick

The arrears payment.  Just to be clear are we saying if you deferred a £15k per year pension by 5 years you will get

a) a £75k lump sum in addition to an index linked £15k pension per year (index linked from 60) or,

b) you only get the £15k index linked pension and no lump sum or adjustment to the £15k to take into account the 5 years deferral

I think it's b) and the mention of arrears only relates to the fact you're paid your pension a month in arrears.


   

Sunsh1ne54

Can anyone explain the cost of living increase payments if not retiring in April please. I’m due to claim my Classic pension in January next year - will I lose out on the cost of living increase into the following year? Thanks

hugheskevi

Sunsh1ne54 said:

Can anyone explain the cost of living increase payments if not retiring in April please. I’m due to claim my Classic pension in January next year - will I lose out on the cost of living increase into the following year? Thanks

The exact process depends if you are retiring from active or deferred status, and if retiring from active status whether your highest final pensionable earnings are from a past period or not.

But no, you don't lose out on cost of living. There is a process called second bite lump sum that applies at year-end, and pension is uprated appropriately depending on type of retirement.

marky_b_2

uknick said:

The arrears payment.  Just to be clear are we saying if you deferred a £15k per year pension by 5 years you will get

a) a £75k lump sum in addition to an index linked £15k pension per year (index linked from 60) or,

b) you only get the £15k index linked pension and no lump sum or adjustment to the £15k to take into account the 5 years deferral

I think it's b) and the mention of arrears only relates to the fact you're paid your pension a month in arrears.


   

I explained to MyCSP that I was thinking of only taking my Premium pension by going partial retirement and I wouldn't be taken my deferred classic until i'm 62 as I think that's when I will be retiring.

I asked the specific question regarding the two years worth of pension in Classic from age 60-62

She said I would have all the money backdated until Age 60 with either inflation or CPI (i can't remember the exact one she said)  added each year until I retire.

I was told the lump sum would be based on my pension at aged 60 and that it would not rise with CPI/inflation between aged 60 and when I finally retire. 




I can supply my enquiry reference number if you are contacting MyCSP so that you can quote the advice I was giving. 

This is the email reply to my phone call regarding the above question

Date: 12 June 2023 Dear Mr C Thank you for your recent enquiry. Once in payment, your preserved classic pension will increase each April by inflation. If you choose to defer claiming this pension until after your normal retirement age (60), it would still attract the same annual inflation increases, which continue past this age. However, it is important to note that the lump sum only attracts increases up to age 60. If you defer claiming your preserved classic pension, it will be paid in arrears and backdated to your 60th birthday. The arrears payment will be calculated as if the pension had been claimed at 60, reflecting the correct inflation rates applicable. If you access your current pension through partial retirement, your combined salary and pension should ideally not be more than what you were earning before you partially retired (your 'salary of reference'). This is because, if your new part-time salary plus your pension exceed your pre-partial retirement salary, we deduct the excess from your pension. This is known as abatement. You can find more detail on this here: https://www.civilservicepensionscheme.org.uk/planning-for-retirement/what-are-my-options/partial-retirement/abatement/ If you wish to, you may claim your preserved classic pension while you continue to work, by completing and returning the ‘Change of details and retirement application form – deferred members’ form from the Civil Service Pension website: http://www.civilservicepensionscheme.org.uk/members/member-forms/ To assess abatement, the salary of reference used for the preserved pension would usually be the salary that you received on the last day of your original service for your preserved pension. This figure is adjusted to take inflation into account. If you decide to partially retire, this will provide access only to your current pension benefits. You can keep your classic pension preserved, and access it at a later time, as describe above. I hope this answers your query. Please let us know if you have any other questions.

Sunsh1ne54

hugheskevi said:

Sunsh1ne54 said:

Can anyone explain the cost of living increase payments if not retiring in April please. I’m due to claim my Classic pension in January next year - will I lose out on the cost of living increase into the following year? Thanks

The exact process depends if you are retiring from active or deferred status, and if retiring from active status whether your highest final pensionable earnings are from a past period or not.

But no, you don't lose out on cost of living. There is a process called second bite lump sum that applies at year-end, and pension is uprated appropriately depending on type of retirement.

Thank you, I’m deferred. That’s useful to know. 

uknick

marky_b_2 said:

uknick said:

The arrears payment.  Just to be clear are we saying if you deferred a £15k per year pension by 5 years you will get

a) a £75k lump sum in addition to an index linked £15k pension per year (index linked from 60) or,

b) you only get the £15k index linked pension and no lump sum or adjustment to the £15k to take into account the 5 years deferral

I think it's b) and the mention of arrears only relates to the fact you're paid your pension a month in arrears.


   

I explained to MyCSP that I was thinking of only taking my Premium pension by going partial retirement and I wouldn't be taken my deferred classic until i'm 62 as I think that's when I will be retiring.

I asked the specific question regarding the two years worth of pension in Classic from age 60-62

She said I would have all the money backdated until Age 60 with either inflation or CPI (i can't remember the exact one she said)  added each year until I retire.

I was told the lump sum would be based on my pension at aged 60 and that it would not rise with CPI/inflation between aged 60 and when I finally retire. 

Thanks for this.

If they add back the 2 years deferred money, how do they work out the annual amount added to your pension?  For example, say you deferred £30k (2 years worth of a £15k pension).  Is this added back over 15 years at £2k per year?

  

marky_b_2

Thanks for this.

If they add back the 2 years deferred money, how do they work out the annual amount added to your pension?  For example, say you deferred £30k (2 years worth of a £15k pension).  Is this added back over 15 years at £2k per year?

I think from memory, it was a lump sum and she mentioned that it could affect the tax years for when the pension was deferred or maybe it was me that has to contact HMRC to explain the lump sum payment was for deferred pension.

I'm positive she said a lump sum though.

uknick

marky_b_2 said:

Thanks for this.

If they add back the 2 years deferred money, how do they work out the annual amount added to your pension?  For example, say you deferred £30k (2 years worth of a £15k pension).  Is this added back over 15 years at £2k per year?

I think from memory, it was a lump sum and she mentioned that it could affect the tax years for when the pension was deferred or maybe it was me that has to contact HMRC to explain the lump sum payment was for deferred pension.

I'm positive she said a lump sum though.

Thanks.  Not sure the tax treatment of a deferred lump sum.  One would have thought it be different to a lump sum from a drawdown pension where the 1st 25% is tax free.

hugheskevi

uknick said:

marky_b_2 said:

Thanks for this.

If they add back the 2 years deferred money, how do they work out the annual amount added to your pension?  For example, say you deferred £30k (2 years worth of a £15k pension).  Is this added back over 15 years at £2k per year?

I think from memory, it was a lump sum and she mentioned that it could affect the tax years for when the pension was deferred or maybe it was me that has to contact HMRC to explain the lump sum payment was for deferred pension.

I'm positive she said a lump sum though.

Thanks.  Not sure the tax treatment of a deferred lump sum.  One would have thought it be different to a lump sum from a drawdown pension where the 1st 25% is tax free.

The lump is 100% arrears of taxable income. It is paid along with 1st payment and 100% of it is taxed in line with Tax Code in use. 

As some of the money is due for a previous tax-year(s), it is possible to write to HMRC and request that rather than all be taxed in year of receipt, the amounts are moved to the year in which they were due and taxed accordingly. MyCSP would either supply a form automatically with the information required for HMRC, or this could be requested if not automatic.