Civil Service 'Classic' and early retirement (pre 55)

MurdoMacSy

Hello everyone

I am looking for any experience / advice on leaving pre 55 based on a current (scheme year 24-25 and scheme years 25-26) period of higher earnings due to a temporary promotion. My classic length of service (post McCloud judgement) will be 28 years 171 days and I am a Classic member. 

So my pensionable earnings: 

23-24 scheme year - £49008
24-25 scheme year - £59870

retirement modeller gives following at 55 based on my current salary which will be the 'peak of my earnings' before 55 - at which point I intend to retire from the Civil Service in full:
 

Estimated Annual Pension £22,826 / Estimated Tax Free Lump Sum: £58,802

My query is this - when would the earliest and latest I could retire in order to maximise this advantage of higher salary as the modellers only go to 55 and I think by the 3 year rule I would be outside this window should I wait till my 55th birthday (August 2029). Is there any pitfalls or disadvantage to going pre 55?  

Thanks for any guidance / info or experience

hugheskevi

My query is this - when would the earliest and latest I could retire in order to maximise this advantage of higher salary 

Earliest is 1 year after the date from which you started to receive a higher salary. Latest is 2 years after the date from which your higher salary reduced.

should I wait till my 55th birthday (August 2029). Is there any pitfalls or disadvantage to going pre 55?  

If you wait that long the higher salary will have dropped out of the 3 year window. You could switch to Partnership to lock in the higher salary period before it drops out of the window.

If you leave before 55 you do not receive any pension increases until you reach age 55 (the increases you missed out on are applied with prospective effect only from your 55th birthday).

MurdoMacSy

Hi @hugheskevi - that was just the information I was after, thank you for taking the time to share that. 

Best wishes

MurdoMacSy

Done a bit more digging based on that information last night. If correct then in order to fully maximise it will be November 2027, any idea how that would change if I waited till my 54th birthday - all this is trying o balance the actuarial reductions versus benefit of extra pensionable salary and find a ‘sweet spot’ which as you say will definitely be pre 55. 

hugheskevi

MurdoMacSy said:

Done a bit more digging based on that information last night. If correct then in order to fully maximise it will be November 2027, any idea how that would change if I waited till my 54th birthday - all this is trying o balance the actuarial reductions versus benefit of extra pensionable salary and find a ‘sweet spot’ which as you say will definitely be pre 55. 

Your pensionable pay is calculated pro-rate over the relevant 1 year period. So if you had 11 months at £40,000 and 1 month at £50,000 your final pensionable earnings would be £40,833

Accepting a lower final pensionable earnings is a real loss to the pension. An actuarial reduction is just moving things around, but preserving the overall value.

You could switch to Partnership to lock in the final pensionable earnings, continue in work with Partnership pension, leave work whenever you like, and commence pension whenever you like. That would preserve the value from higher final pensionable earnings and reduce actuarial reduction.

MurdoMacSy

Thanks again for your advice, so in summary I should try to retire while I have a full year in scope - so shortly after 53rd birthday to retain that high salary in Classic calculation. Will look into partnership options too. Thanks ☺️ 

MurdoMacSy

MurdoMacSy said:

Thanks again for your advice, so in summary I should try to retire while I have a full year in scope - so shortly after 53rd birthday to retain that high salary in Classic calculation. Will look into partnership options too. Thanks ☺️ 

Does that sound right / make sense? Thanks @hugheskevi

hugheskevi

MurdoMacSy said:

MurdoMacSy said:

Thanks again for your advice, so in summary I should try to retire while I have a full year in scope - so shortly after 53rd birthday to retain that high salary in Classic calculation. Will look into partnership options too. Thanks ☺️ 

Does that sound right / make sense? Thanks @hugheskevi

As long as a full year of the higher salary is within the look-back period (last 3 years, measured in 91-day step backs), then yes.

MurdoMacSy

You’re a star, thank you 😁

MurdoMacSy

@hugheskevi a big thank you for your time, knowledge and willingness to answer these questions. Having spent some time researching and with confirmation of end date of my current high period of pay on 30/11/25 I have decided to remain in Alpha with extra contributions till circa 01/04/27 and then switch to partnership giving me the 3 year look back window into my highest pay period circa £60k before I drop down to circa £50k. A couple of years maxing out partnership then call it a day at 55. I’ll have to wait a couple of years for any DC funds but with 28.47 years in classic, 5 years of above average wages into Alpha and a decent lump sum it feels like my plan will give me best of all worlds. I owe you a coffee! 

If these dates work, would I be correct that once I switch the deferred classic is subject to annual CPI rises until it is drawn? 

SimonSeys

I have recently switched to partnership for various reasons - partly to lock in high CPI increases but also because personal circumstances mean 18% now is worth more to me than 2.32% per year aged 67.

Do not underestimate how long it takes to switch.  I sent my form in early Feb but it wasn’t until June that the switch happened. 

In my case it was an annoyance as I’d hoped to switch at the start of the financial year which would make it easy for tax calculations, and a two month delay made no real difference, but it might be more impactful for others. 

Simon