Civil Service Pension advice

Dazed_and_C0nfused

hugheskevi said:

Dazed_and_C0nfused said:

Sliceoflemon said:

..my last comment was cut off so I don't know what I did wrong..! To continue, full time civil servant 1989 - 2022. In 2022 I went part-time reducing to 4 days (29.6 hours). Now going for part- retirement 3 days (22.2 hours). I haven't ever been promoted. I have received the part- retirement options which factor in McCloud. I had classic plus then moved to Alpha.

Quote A 
Classic Plus £20424.18
Lump sum £21087.68
Alpha £1760

Quote B
Classic Plus £15607.95
Alpha £6482.57

I just don't want to shoot myself in the foot by choosing badly. Is there a way of avoiding abatement and also taking all classic plus or should I take a reduced % of classic plus?

Any advice gratefully received!

Quote B would seem to lessen the likelihood of abatement. Assuming you are leaving Alpha until NPA.

Would details of your current salary be a useful piece of information to have provided?

It doesn't matter whether alpha is taken or left to NPA - it doesn't count toward abatement unlike all the other schemes/sections.

Option B would also have a lump sum that should be included in the comparison.

Taking all of classic plus would be the most likely thing to do if aged 60 or older, due to no arrears or actuarial enhancement if commenced after Normal Pension age.

Duly noted thanks.

Suzycoll

oldgrumpyscot said:

I've struggled to find an adviser who knows about Civil Service Pensions so I thought I'd try posting here to see if anyone could help.

Having turned 60 in March, I decided to apply for partial retirement. This was approved and I've now received my pension quote. My plan was to reduce my hours by 40% which would reduce my current salary of £54419 to £32652. My premium pension quote is £29972 so adding that to my new salary comes to £62624. Because of abatement, I would lose £8205 which isn't ideal. However, if I take a lump sum of £100K, that would reduce my pension by £8333 (on the £1 for every £12 formula) giving me a new pension of £21639. Adding that to my reduced salary of £32652 would give £54291 so only £128 less than my current salary pre-retirement. 

Am I missing anything here? Is there some hidden disadvantage to taking the lump sum? 

Any thoughts or comments gratefully received! 

i cant help you out on your figures - I apologise

My take is ... why don't you just fully retire on such a good pension ? 

Sliceoflemon

hugheskevi said:

Dazed_and_C0nfused said:

Sliceoflemon said:

..my last comment was cut off so I don't know what I did wrong..! To continue, full time civil servant 1989 - 2022. In 2022 I went part-time reducing to 4 days (29.6 hours). Now going for part- retirement 3 days (22.2 hours). I haven't ever been promoted. I have received the part- retirement options which factor in McCloud. I had classic plus then moved to Alpha.

Quote A 
Classic Plus £20424.18
Lump sum £21087.68
Alpha £1760

Quote B
Classic Plus £15607.95
Alpha £6482.57

I just don't want to shoot myself in the foot by choosing badly. Is there a way of avoiding abatement and also taking all classic plus or should I take a reduced % of classic plus?

Any advice gratefully received!

Quote B would seem to lessen the likelihood of abatement. Assuming you are leaving Alpha until NPA.

Would details of your current salary be a useful piece of information to have provided?

It doesn't matter whether alpha is taken or left to NPA - it doesn't count toward abatement unlike all the other schemes/sections.

Option B would also have a lump sum that should be included in the comparison.

Taking all of classic plus would be the most likely thing to do if aged 60 or older, due to no arrears or actuarial enhancement if commenced after Normal Pension age.

Thanks very much for your responses.
My current gross salary is £33200 on 4 days a week. After deductions I currently take home £1926 per month.

I know I am pretty ignorant about these matters... but are the quotes gross or net amounts? I am wondering what figures to compare.

I am now wondering whether the best option (to avoid abatement) may be to take the Alpha from option B and a very small % of the classic plus (to make up the shortfall from the reduced monthly salary) along with the £21000 lump sum and then defer most of the remaining classic plus?

Would the un-taken proportion of classic Plus accumulate and be payable on full retirement as a lump sum or is it all lost if not taken- I am confused about what you say about there being no arrears (sorry - entirely my ignorance...).

Again any comments/advice gratefully received!

hugheskevi

Sliceoflemon said:

hugheskevi said:

Dazed_and_C0nfused said:

Sliceoflemon said:

..my last comment was cut off so I don't know what I did wrong..! To continue, full time civil servant 1989 - 2022. In 2022 I went part-time reducing to 4 days (29.6 hours). Now going for part- retirement 3 days (22.2 hours). I haven't ever been promoted. I have received the part- retirement options which factor in McCloud. I had classic plus then moved to Alpha.

Quote A 
Classic Plus £20424.18
Lump sum £21087.68
Alpha £1760

Quote B
Classic Plus £15607.95
Alpha £6482.57

I just don't want to shoot myself in the foot by choosing badly. Is there a way of avoiding abatement and also taking all classic plus or should I take a reduced % of classic plus?

Any advice gratefully received!

Quote B would seem to lessen the likelihood of abatement. Assuming you are leaving Alpha until NPA.

Would details of your current salary be a useful piece of information to have provided?

It doesn't matter whether alpha is taken or left to NPA - it doesn't count toward abatement unlike all the other schemes/sections.

Option B would also have a lump sum that should be included in the comparison.

Taking all of classic plus would be the most likely thing to do if aged 60 or older, due to no arrears or actuarial enhancement if commenced after Normal Pension age.

Thanks very much for your responses.
My current gross salary is £33200 on 4 days a week. After deductions I currently take home £1926 per month.

I know I am pretty ignorant about these matters... but are the quotes gross or net amounts? I am wondering what figures to compare.

I am now wondering whether the best option (to avoid abatement) may be to take the Alpha from option B and a very small % of the classic plus (to make up the shortfall from the reduced monthly salary) along with the £21000 lump sum and then defer most of the remaining classic plus?

Would the un-taken proportion of classic Plus accumulate and be payable on full retirement as a lump sum or is it all lost if not taken- I am confused about what you say about there being no arrears (sorry - entirely my ignorance...).

Again any comments/advice gratefully received!

Quotes will always be gross.

If you are 60 or older, not taking the classic plus pension means you forfeit the amount you could be receiving. Once you claim the classic plus pension it would be put into payment, but the past amount you could have received from age 60 would not be paid as arrears.

The order I would make decisions is:

1. Decide which of your 2015 Remedy choice options you prefer (Option 1 or 2). Consider carefully whether you want to take any lump sum beyond the standard amount that comes with Classic Plus, as the 12:1 commutation rate is very poor, although the older you are the better it becomes. If you are aged 60 it is a poor rate. I would ignore any thoughts of abatement at this point, unless the two options are very similar.
2. If you are 60 or older, take all of the classic plus pension. It doesn't matter what you do with alpha, take it if you want, or leave it for later as you wish.
3. Set your working hours to ensure you are not subject to abatement on the classic plus pension.

Sliceoflemon

Thanks for the response Hugheskevi.

I have probably put cart before horse as I have already reshaped my job to reduce working hours without thinking about abatement..

So, as I have already done this, is it best to go for Option B as the classic plus proportion is lower (so less potential abatement)?

Or maybe take just a part of classic plus under option B and defer the remainder along with the Alpha?

I only intend to take the standard lump sum.

Many thanks again! 😁 

hugheskevi

Sliceoflemon said:

Thanks for the response Hugheskevi.

I have probably put cart before horse as I have already reshaped my job to reduce working hours without thinking about abatement..

So, as I have already done this, is it best to go for Option B as the classic plus proportion is lower (so less potential abatement)?

Or maybe take just a part of classic plus under option B and defer the remainder along with the Alpha?

I only intend to take the standard lump sum.

Many thanks again! 😁 

I don't think it is wise to base your 2015 Remedy decision that involves pension payable for the rest of your life around abatement.

You do not say what the Lump Sum for Option B is nor your age and those are important factors, but the lump sum should be lower than Option A. Option A has a pension of £22,184 and Option B is £22,091. So in value terms Option A appears better by nearly £100 per year, as well as having a higher lump sum. 

Not taking classic plus means forfeiting it, so why would you want to do that?  

You need to take time to make sure you understand this and do some careful calculations, you are in danger of making some very poor decisions.

Sliceoflemon

Thanks Hugheskevi.. really appreciate all the advice.

Sorry I am providing necessary info piecemeal - not my intention, I just don't know what to focus on and am panicking rather...!

Lump sum for Option B is £21087.68 so same as option A.

I have turned 60 last week. I want to carry on working for a spell.

So I understand that not taking classic plus under either option would mean the amounts that I could be drawing on are not banked but are simply lost?

But if I take the full classic plus now then won't I likely lose some anyway due to abatement? So is it swings and roundabouts?

I think I am trying to decide the least worst option..

Do you think taking full classic plus under option B could be possibly better than under option A or vice versa 

I appreciate if you can't say please put me right if necessary ...

Many thanks 

hugheskevi

That all makes sense - the lump sums should be the same as those are only based on pre-2002 service, but always good to check. I assumed you were about 60, so that means that any classic plus you are entitled to but do not claim is simply lost until such time as you do claim it.

Do you know the exact amount of classic plus pension you can receive until abatement applies? That is key to your decision making.

The difference between Option A and Option B is now slightly less than £100 per year, so they are essentially the same. That is very good, as it significantly limits the potential to make a significant poor financial decision. That may well mean that despite Option B being marginally inferior in cash terms, it may well be better if abatement applies.

So I think the key take-aways are:

• Your choice between Option A and Option B has little long-term consequence (<£100 p/a)
• You need to find out the exact level at which abatement applies to your classic plus pension
• Depending on the abatement amount, that would mean you would choose Option A if abatement didn't apply in any scenario, choose option B if abatement would apply under Option A but not Option B, and seek to reduce your hours below 22.5 if abatement would apply under both Option A and Option B, such that you worked a sufficient number of hours to avoid abatement under Option B. 

Sliceoflemon

That is fantastic Hugheskevi, thanks so much for un-muddying the waters for me! I am really comforted now that it looks like whatever decision I make will not have hugely damaging consequences.

I will definitely find out from the pension people the exact amount of classic plus pension I can receive until abatement applies.

Really appreciate the time you have taken to help!