Please help me understand PCSPS / Alpha Ill Health Pension Options (Civil Service)

JillyC8

Hi, a friend has received a letter giving her two options for taking her early ill-health pension from the civil service. She has asked me to look at it for her as she doesn't understand it so I've summarised as I see it. However, one option is clearly more favourable than the other, which I don't understand. 
Please could anyone help/comment (as I know there are many clever pension-wise people on here) as to why this could be? The pension appears to be made up of two parts - PCSPS and Alpha. I've attached the summary below. Why is Option B so much more generous or do you think I've made a mistake?

JoeCrystal

It may be that the Alpha accrual rate is much more generous at 1/43 rather than 1/60 of the salary each year. That is the first thing that comes to mind. I am not sure, to be honest, either.

Dazed_and_C0nfused

Are the Alpha figures based on the pension being paid from her State Pension age or now?

JillyC8

The pension is payable from October 2022. She has been at loggerheads with them for a couple of years as she feels she was forced out due to ill health, and has only just found out she could have been taking her pension.

kassy64

Option A = Pension figures based on McCloud judgement/ruling (Alpha wef from 2022)
Option B = Pension figures based on not taking McCloud judgement/ruling (Alpha wef 2015)

I retired a 2 years ago and been told my options pack should arrive before March 2025. I will have a similar decision to make.
Also, as mentioned depends if the Alpha calculations are based on taking them at NPA. If taken now they may well be reduced from those figures, otherwise it is hard to explain why Option B is more beneficial.
From my basic calculations my figures shouldn't be to dissimilar to each other. 
My understanding also is that the PCSPS normally has a standard lump sum of 3 x pensionable pay which isnt shown in Option A, you have shown 'OR', whereas i believe that part should always have a lump sum.

Silvertabby

The civil service ill health level 3 pension is paid immediately, and is based on actual accruals without any added ill health enhancements, but without any reductions for early payment.

Does the covering letter nention the McCloud remedy?  Under the 'remedy' pension fund members over a certain age have to be offered the choice of reverting to the old scheme accruals up to 2022, or they can opt to remain on the new, CARE, accruals from 2015 if this gives them a better result.

In your friend's case, the much higher accrual rate of the CARE scheme gives her the (much) better result.

kassy64

The relevant dates shown in the options shown match the McCloud ruling (they do for my situation anyway Home Office). That can be the only reason for showing Option A and B

JillyC8

Right, just looking back at the long, complicated letter, I think I made a mistake. I've corrected it below as per attached. Does this seem more sensible/likely? There is still a difference but not as far apart now...

kassy64

Someone with more knowledge than me will know but your sheet shows the PCSPS pension being offered without a lump sum in option A and B. My understanding is that this part of the pension has a standard lump sum of 3 x pensionable pay, however your sheet shows an option with pension only and no lump sum. Is this correct? Maybe its different for ill health retirement or very short service. When I retired I had to take the standard 3 x lump sum and had the option to increase it only, wasn't aware it could be reduced. Anyone have thoughts on that.
Obviously each members options and circumstances  will be different, but my understanding is that under McCloud ruling the figures would be similar or in most cases beneficial to take Option A (hence why the judgement was made in the first place) to take the MCloud ruling Option A. Your example seems its the opposite, and Option B is more beneficial

Dazed_and_C0nfused

Are you absolutely certain about the PCSPS lump sum in option A?

Don't know much about the specifics of ill health retirement but a factor of over 28 looks extremely high for the civil service pension scheme.

She would be giving up £1,546 of pension for £44,107.  Commutation rate of 28.5.

Whereas the Alpha one of 12 (£150 given up for life, in return for one off £1,800) is typical of the civil service.

hugheskevi

kassy64 said:

Someone with more knowledge than me will know but your sheet shows the PCSPS pension being offered without a lump sum in option A and B. My understanding is that this part of the pension has a standard lump sum of 3 x pensionable pay, however your sheet shows an option with pension only and no lump sum. Is this correct? Maybe its different for ill health retirement or very short service. When I retired I had to take the standard 3 x lump sum and had the option to increase it only, wasn't aware it could be reduced. Anyone have thoughts on that.

PCSPS includes the follow sections. Presumably the member is in Premium or Nuvos.

• Classic (automatic lump sum)
• Classic Plus (automatic lump sum)
• Premium (no automatic lump sum)
• Nuvos (no automatic lump sum)