Taking Civil Service Pension Early

DE_612183

I'm sure I've read it somewhere but can't find the post.

If I take my civil service pension early ( but after 2 years service ) I can get a reduced amount.

I'm sure somewhere I read it works out at about a 5% reduction for each year.

I'm thinking of retiring at 62 - 5 years early.

So if I have a annual pension accrued for say £20,000 PA based on retiring at 67, if I take that early I reduce it by 25% ( £5k PA for the rest of the term ).

Therefore for 5 years I get £15k ( 45k ) which I wouldn't have got if I waited, but the downside is a  reduced amount for the entire term.

I think therefore if I live longer that 76 it works out not financially a benefit, however retiring 5 years early maybe worth it!

Inbetweeners

Why don't you use the MyCSP online modeller?

The reduction factors are not quite 5% but differ for Alpha and the legacy schemes.

DE_612183

Inbetweeners said:

Why don't you use the MyCSP online modeller?

The reduction factors are not quite 5% but differ for Alpha and the legacy schemes.

Hi @i@Inbetweeners - I did use the modeller - but it doesn't seem to reduce  the amount when you drop the retirement age under 67 - there is an info window that states:

Please note that if you select a retirement age earlier than your Normal Retirement Age your pension will be actuarially reduced in accordance with the scheme rules.  

I read that to mean that the calculation will be outside of the amount shown.

hugheskevi

The factors are in table x-404 of the speadsheet at this link.

Taking a pension with Normal Pension age of 67 at age 62 would have an actuarial reduction of 23%.

So if I have a annual pension accrued for say £20,000 PA based on retiring at 67, if I take that early I reduce it by 25% ( £5k PA for the rest of the term ).

Ensure you are not taking account of any pension accrual between age 62-67 when making the calculation.

Therefore for 5 years I get £15k ( 45k ) which I wouldn't have got if I waited, but the downside is a  reduced amount for the entire term.

I think therefore if I live longer that 76 it works out not financially a benefit, however retiring 5 years early maybe worth it!

5 x £15K = £75K? Not £45K?

I think therefore if I live longer that 76 it works out not financially a benefit, however retiring 5 years early maybe worth it!

£20K from age 67 or £15,400 from age 62. Assume basic rate taxpayer and no lump sum commutation. Net amount received are £16,000 and £12,320 respectively.

The cross-over point would be age 82/83 - live longer than that, and you receive more in real terms net of tax from taking alpha at age 67. Die before then, and taking at age 62 gives a higher real amount net of tax.

Marcon

DE_612183 said:

I'm sure I've read it somewhere but can't find the post.

If I take my civil service pension early ( but after 2 years service ) I can get a reduced amount.

I'm sure somewhere I read it works out at about a 5% reduction for each year.

I'm thinking of retiring at 62 - 5 years early.

So if I have a annual pension accrued for say £20,000 PA based on retiring at 67, if I take that early I reduce it by 25% ( £5k PA for the rest of the term ).

Therefore for 5 years I get £15k ( 45k ) which I wouldn't have got if I waited, but the downside is a  reduced amount for the entire term.

I think therefore if I live longer that 76 it works out not financially a benefit, however retiring 5 years early maybe worth it!

https://www.civilservicepensionscheme.org.uk/knowledge-centre/resources/actuarial-factors/

DE_612183

hugheskevi said:

The factors are in table x-404 of the speadsheet at this link.

Taking a pension with Normal Pension age of 67 at age 62 would have an actuarial reduction of 23%.

So if I have a annual pension accrued for say £20,000 PA based on retiring at 67, if I take that early I reduce it by 25% ( £5k PA for the rest of the term ).

Ensure you are not taking account of any pension accrual between age 62-67 when making the calculation.

Therefore for 5 years I get £15k ( 45k ) which I wouldn't have got if I waited, but the downside is a  reduced amount for the entire term.

I think therefore if I live longer that 76 it works out not financially a benefit, however retiring 5 years early maybe worth it!

5 x £15K = £75K? Not £45K?

I think therefore if I live longer that 76 it works out not financially a benefit, however retiring 5 years early maybe worth it!

£20K from age 67 or £15,400 from age 62. Assume basic rate taxpayer and no lump sum commutation. Net amount received are £16,000 and £12,320 respectively.

The cross-over point would be age 82/83 - live longer than that, and you receive more in real terms net of tax from taking alpha at age 67. Die before then, and taking at age 62 gives a higher real amount net of tax.

sorry top of head calculations! Maths not my strong point today!

BoxerfanUK

DE_612183 said:

I'm sure somewhere I read it works out at about a 5% reduction for each year.

I'm thinking of retiring at 62 - 5 years early.

So if I have a annual pension accrued for say £20,000 PA based on retiring at 67, if I take that early I reduce it by 25% ( £5k PA for the rest of the term ).

I think you might find that the 5% reduction for each year is based on your pensionable amount (BEFORE REDUCTION) accrued at the time you actually leave aged 62 and not based on what you 'would have got' at age 67 had you not gone early.

Inbetweeners

DE_612183 said:

Inbetweeners said:

Why don't you use the MyCSP online modeller?

The reduction factors are not quite 5% but differ for Alpha and the legacy schemes.

Hi @i@Inbetweeners - I did use the modeller - but it doesn't seem to reduce  the amount when you drop the retirement age under 67 - there is an info window that states:

Please note that if you select a retirement age earlier than your Normal Retirement Age your pension will be actuarially reduced in accordance with the scheme rules.  

I read that to mean that the calculation will be outside of the amount shown.

Actuarial reduction is the technical term for the 5% reduction. If yours isn't reducing when you move the retirement age to 65 then something is wrong, either that or your NPA is 65. What happens when you take it below 65?

GunJack

BoxerfanUK said:

DE_612183 said:

I'm sure somewhere I read it works out at about a 5% reduction for each year.

I'm thinking of retiring at 62 - 5 years early.

So if I have a annual pension accrued for say £20,000 PA based on retiring at 67, if I take that early I reduce it by 25% ( £5k PA for the rest of the term ).

I think you might find that the 5% reduction for each year is based on your pensionable amount (BEFORE REDUCTION) accrued at the time you actually leave aged 62 and not based on what you 'would have got' at age 67 had you not gone early.

I was thinking the same....

Dazed_and_C0nfused

BoxerfanUK said:

DE_612183 said:

I'm sure somewhere I read it works out at about a 5% reduction for each year.

I'm thinking of retiring at 62 - 5 years early.

So if I have a annual pension accrued for say £20,000 PA based on retiring at 67, if I take that early I reduce it by 25% ( £5k PA for the rest of the term ).

I think you might find that the 5% reduction for each year is based on your pensionable amount (BEFORE REDUCTION) accrued at the time you actually leave aged 62 and not based on what you 'would have got' at age 67 had you not gone early.

Nah, bet this is one of platinum plated civil service pensions where originally intending to work those 5 years is enough to for you to be given the 5 years extra accrual, even if you retire early and don't work them 😳

DE_612183

No this is Alpha.

Sorry @BoxerfanUK &@gunjack - I don't understand what you mean by (BEFORE REDUCTION) - I'm basing the £20k on the pensionable value at the age of 62, but taking at 67.

I know if I work the extra 5 years that puts an addition 5 x 2.32% of whatever my salary is into the pot as well.

@Inbetweeners - ok when I change the retirement age on the modeller - the value does go down, so I assume that this is the reduction based on extending the payout years, rather than adding in additional years of contribution...