Early retirement civil service

Robbo1968

I am hoping to retire early from civil service, thinking next April. 

Currently this years pay rise has not been sorted and is still being negotiated, (could be between 3% and 8% allegedly and backdated to July)
Most of my years have been in classic scheme so my question is how much impact will this pay rise have to my pension calculation? And is it worth waiting for the rise before I submit my retirement forms?

singhini

How much of an impact is it going to have -----> don't know, you haven't given enough details.

However i personally would wait before submitting retirement forms as any increase most probably will have a positive impact. 

Take this with a pinch of salt but for Classic, your “final pensionable earnings” are:

Normally your highest 12 consecutive months of pensionable pay in the last 3 years before you retire (or leave).It includes any backdated pay awards that relate to that period.

So, if a pay rise is backdated to July, and you retire after it has been implemented, that increase might be included in your final pensionable earnings — as long as it falls within that “best 12 months” window.

I think your pension is made up of 1/80 × final pensionable earnings × years of reckonable service Plus an automatic lump sum of 3 × your annual pension.

So now lets make up some numbers for illustration purposes (30 years service and £40k salary)

So 30 years of service at £40k @1/80th = £15k annual salary + lump some of £45k versus £42k @ 1/80th = £15.750k + lump sum £47,250 (i.e. 5%)

£15k pension + £45k lumpsum 

£15.750 pension + £47,250 lumpsum

So lets say your final salary was £40k but now its going to be £42k (5% increase) that could be an extra £750 per year for life (and a bigger lumpsum).

However we don't know, as we don't have all your details. 

hugheskevi

Regardless of when you retire, the backdated pay will be used to calculate your pension entitlement on your last day of service.

If you retire before it is implemented, then you will get paid arrears when it is implemented and details sent to the scheme administrator.

If the award is 3% it won't be worth waiting (you are trading 3% earnings uplift against CPI uplift for the time you delay retirement, and CPI is probably higher). Whereas if it is 8% then it may well be worth waiting until end June to retire to lock in a full 12 months at the new salary.