Partial Retirement on a Civil Service Pension and Abatement

Sootyandspark

I have started to look into partially retiring when I turn 55 later this year. I was on classic but now on Alpha (impacted by Remedy). I’m reducing my hours by 20% but understand that any monthly pension payment may be abated if it’s more than what I currently earn at full time hours. I know this doesn’t apply to Alpha. 

My question is that the pension modeller shows two options; Option A: benefits for the Remedy period under legacy scheme (Classic) Option B: benefits for the Remedy period in Alpha.

Which is the better option to avoid abatement? The figures are based on the full 25% tax free lump sum with a difference of about £9k which I’m not considering as a deciding factor. 

Looking at advice from the CS Pension experts on here as there are many (even the helplines). And I can’t find an affordable IFA. I’d be very grateful for any advice or pitfalls I should be looking for as, at the moment, it seems too good to be true that I could reduce working hours without a huge impact on my finances. I’m in a lucky position that I don’t need to think about the future, once I’ve fully retired so it’s more about work / life balance now. Thanks 

hugheskevi

the pension modeller shows two options; Option A: benefits for the Remedy period under legacy scheme (Classic) Option B: benefits for the Remedy period in Alpha.

Which is the better option to avoid abatement?

Solely in terms of abatement, Option B. But this is unlikely to amongst the most important factors, and probably only a consideration if the outcome under option B was very similar but slightly inferior to Option A.

More likely is that you choose the most financially advantageous option, then set reduced working hours and proportion of pension taken so as to avoid abatement.

The figures are based on the full 25% tax free lump sum

At age 55, taking the full lump sum would likely be a very poor financial decision.

it seems too good to be true that I could reduce working hours without a huge impact on my finances. I’m in a lucky position that I don’t need to think about the future, once I’ve fully retired so it’s more about work / life balance now. Thanks 

You could set Partial Retirement such that your income today remains unchanged whilst reducing hours. The impact of that falls on the future pension - it is lower due to the actuarial reduction associated with taking it early, and you accrue new pension at a lower rate. That is a large impact, but you may consider it worth it based on your own circumstances.

Sootyandspark

Thanks for such a swift response. I’m not planning on taking the full lump sum - I added that only as indication as to what the options are based on. 

So to clarify, if I take Option B, the monthly pension payment could still be abated if 64.01% of it takes me above my current salary? I am currently on £78948 with the reduced salary at £63958. 

hugheskevi

It is a bit more complicated than that due to the assumptions used about lump sums and how that applies to the abatement calculator. You should use the abatement calculator to ensure you get the exact calculation.

Sootyandspark

Thanks. I’ll have a look at this again - I found it a bit complicated but then, pensions are 😊

You don’t happen to provide 121 advice do you. Happy to DM, if so. 

Wobble101

I can’t answer your question but, as someone with a CS pension who was struggling to work out some of the basics, I paid £150 for a consultation with Pen-gage (who specialise in public sector pensions) and really recommend this. They have a Facebook page. 

Hope ok to post that - I found them so helpful. 

Sootyandspark

Wobble101 said:

I can’t answer your question but, as someone with a CS pension who was struggling to work out some of the basics, I paid £150 for a consultation with Pen-gage (who specialise in public sector pensions) and really recommend this. They have a Facebook page. 

Hope ok to post that - I found them so helpful. 

That’s ever so helpful. I will check them out - thanks!

marky_b_2

Just thinking aloud.

Can you not reduce your hours more so that abatement wouldn't apply?

Or, could you just take Alpha with the added remedy period for your partial, if this is enough to cover the loss of your wages and leave Classic until you fully retire?

Although, reducing your pensionable pay would have an impact on your previous classic pension and lump sum I think.

Or take Classic only and leave alpha until you fully retire?

Hugheskevi would be better at explaining that though 

Sootyandspark

marky_b_2 said:

Just thinking aloud.

Can you not reduce your hours more so that abatement wouldn't apply?

Or, could you just take Alpha with the added remedy period for your partial, if this is enough to cover the loss of your wages and leave Classic until you fully retire?

Although, reducing your pensionable pay would have an impact or your previous classic pension and lump sum I think.

Or take Classic only and leave alpha to fully retire?

Hugheskevi would be better at explaining that though 

Thanks - I think I want my cake and eat it 😊 

I’m not greedy though and as long as I can get more or less the same amount from my partial pension + reduced hour salary, I’m happy. I just don’t really know what that amount should be and on principle, rightly or wrongly, I don’t want to lose money from my pension on abatement. 

I already work over my contracted hours without any recompense and know that despite reducing my hours will be doing the same even when partially retired because of the nature of my work. 

Hugheskevi is a fount of all pension knowledge so I shall await his wisdom. 

CorseyEdge

Have you tried this Remedy Benefits Partial Retirement Modeller? It will probably be just as accurate as the MyCSP portal job, plus it enables you to modify partial retirement scenarios, % and Remedy options.

Catflap2

I’m not an expert but based on the figures you’ve posted if you take Option A but only take the Classic benefits now and leave Alpha until you retire (plus you are going to continue to build up Alpha still) that will be pretty close to the amount of salary you are losing by reducing your hours