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

SimonSeys

As @hugheskevi says, it’s worth doing the calculations based on your actual salaries over the years.  In my case (promoted in 2019\20] it’s worth locking in the 10% and 6% CPI uplifts following the Truss administration.  

I also want to live a little in my 50s, so putting £60k pa in Partnership now (including employer contribution) is better for me than 1% a year at 57 or 2.3% at 67.

But YMMV.

Logan72

Been doing a fair amount of reading on the PI, pre and post 55.  I'm still uncertain, so any clarifications would be most welcome.

I get the overall, but not the specifics.

Example:

Untaken deferred Classic pension of £10k in 2015, raised to £15k deferred in 2025 due to CPI increases.  Taken at age 50 in 2025.  What do you get at 50 in 2025 and what do you get at 55 in 2030?

hugheskevi

Logan72 said:

Example:

Untaken deferred Classic pension of £10k in 2015, raised to £15k deferred in 2025 due to CPI increases.  Taken at age 50 in 2025.  What do you get at 50 in 2025 and what do you get at 55 in 2030?

At ages 50, 51, 52, 53, and 54 you get £10k. The pension does not increase at all.

At age 55 the pension is increased to £15k plus CPI increases between 2025 and 2030. There are no arrears paid, just a change in the annual pension payable. In each future year the pension increases by CPI.

SimonSeys

Hi - doesn’t apply to me as I’m in premium, but the above surprises me (NB I’m not saying you’re wrong @hugheskevi!)

In premium I would have thought the pension would increase by CPI until it was taken, but it seems Classic is very different and this only applies from aged 55(?]

hugheskevi

SimonSeys said:

Hi - doesn’t apply to me as I’m in premium, but the above surprises me (NB I’m not saying you’re wrong @hugheskevi!)

In premium I would have thought the pension would increase by CPI until it was taken, but it seems Classic is very different and this only applies from aged 55(?]

Premium works in the same way, and is usually more severely affected. If your final pensionable earnings are based on a past year with inflation adjustment and you take your pension before age 55, the inflation increases are stripped out and your pension between age 50-54 is based on the salary figure without inflation adjustment. At age 55 all the links are restored.

For example, say you left service in 2020 and your best pensionable earnings were based on the average of the best 3 consecutive inflation adjusted years, and those years were 2008-10. Your salary at date of leaving was, say, £50,000, your best inflation adjusted final pensionable earnings are, say, £60,000, and the unadjusted salary from 2008-10 was £40,000. Your pension between 50-54 is based on £40,000. That sort of adds insult to injury, as your final salary was higher, but that isn't used.

The recent years of high inflation make taking the pension before age 55 much less attractive, but it varies on a person-to-person basis.

SimonSeys

Thanks once again HughesKevi.   I didn’t realise that.  It makes a difference to my spreadsheet, not a big one, but something to factor in… 

Logan72

hugheskevi said:

Logan72 said:

Example:9u

Untaken deferred Classic pension of £10k in 2015, raised to £15k deferred in 2025 due to CPI increases.  Taken at age 50 in 2025.  What do you get at 50 in 2025 and what do you get at 55 in 2030?

At ages 50, 51, 52, 53, and 54 you get £10k. The pension does not increase at all.

At age 55 the pension is increased to £15k plus CPI increases between 2025 and 2030. There are no arrears paid, just a change in the annual pension payable. In each future year the pension increases by CPI.

Fantastic and quick information thank you.

So you get ALL the increases (that you didn't get between 50-55) from 2015 to 2030?  Not just those between the 2015 amount (that doesn't change to 2025) and 2030? ie 5 years only increase and not 15?

hugheskevi

Logan72 said:

Fantastic and quick information thank you.

So you get ALL the increases (that you didn't get between 50-55) from 2015 to 2030?  Not just those between the 2015 amount (that doesn't change to 2025) and 2030? ie 5 years only increase and not 15?

Yes, all the past increases are added at age 55, so in this case it would be 15 years of increase and so it would be a very large overnight increase.

Worth noting that the actuarial reductions are lower for years below 55 to reflect this, but as with any actuarial factor, some people will gain from it, and some will lose. Those who leave employment at age 50, with their best final pensionable earnings from their last year of employment, should do quite well. Those who have final pensionable earnings from many years earlier will not do well.

Logan72

What is the purpose of the PI multiplier tables?

I get the yearly CPI increases but what are the very detailed multiplier tables (done every year?) on the treasury website?  I really don't understand them.

Are they somehow connected to the pre and post 55 thing and for part year calculations for first year CPI increase?

Logan72

hugheskevi said:

At ages 50, 51, 52, 53, and 54 you get £10k. The pension does not increase at all.

At age 55 the pension is increased to £15k plus CPI increases between 2025 and 2030. There are no arrears paid, just a change in the annual pension payable. In each future year the pension increases by CPI.

I guess the only real downside is there's no lump sum arrears of any kind.  Obvs you have had pension paid from 50-54 and a big increase from 55 but nothing revised on the lump sum - probably out about £15k here? (lump sum at 50 would be £30k, but lump sum at 55 nearer £45k?)