Civil Service Pension Dilemma

LillieFlower

Hi everybody, this is my first post so I’m really hoping that someone can help me out.

My husband has a new job in the civil service (he’s 24 and hasn’t a pension from previous employments), and so he has the choice between the Premium and Partnership pension schemes. We’ve read all the info on them both, but are a little stuck as to which one would be best for us. He’s hoping to be in this job long term so it’s an important decision really, and there are a few things that we’re looking at in terms of retirement and stuff (a very scary thought for a 23 year old!).

The Premium scheme is currently final salary, but I’m sure this won’t last much longer from all the publicity there has been about civil service pensions lately, and I know that there’s a fair chance that the government will stick the retirement age up to 70 ( :eek: aaaaahh!!! :eek: ) at some point before we would be due to retire, so we don’t want to get tied into a scheme where he can’t retire early (i.e. before the poor bloke pops his clogs from overwork). We’re looking at the Partnership Scheme, but basically we want to be able to do the following:

1. Have the option for husband to retire early (at 55 or 60).
2. Have the option to increase/decrease his contributions depending on how skint we are (I don’t plan to work for a bit if/when we have kids, so there would be just one salary for a few years.)
3. Have a fairly no-risk, reliable income when he does retire.

Obviously, if we went with the Partnership Scheme, we then have the options of taking the pension with Scottish Widows, Standard Life or TUC, which we would then also need advice on please!

Thanks, in advance, for any help you can give me! I’m a pension novice!!!

LillieFlower

Hi again.

Forgot to mention that we could do with a policy that will provide for me if my husband dies first, and I'm also unsure about the impact of being in/contracting out of S2P and what it would mean for us when we hit retirement.

I know this is a lot of info, so any help would be great.

Thanks,

LillieFlower

djohn2002uk

Don't get swayed towards the Partnership scheme untill you've got all the advice you can get on the Premium scheme which appears to me to be the same as I was in as the original Civil Service Pension Scheme. (Find out if it is).
In this scheme you get a maximum of half pay after paying in for 40yrs although you could shorten this by paying "Added Voluntary Contributions"
Don't be mistaken by the description "Final Salary". It doesn't mean you get paid your final salary as a pension, but a pension based on your final salary. In the case of the Civil Service with 40yrs service, 1/2 your final salary.
Also don't think the government will make you work untill you are 70. That is the anticipated/proposed "Retirement Age" but if you can afford to retire before then you will be able to do so minus your "old age pension" or whatever they call it by then.
Your husband as of now could get 40yrs in by the age of 64 and perhaps could purchase 4yrs worth of AVCs and retire at 60 (as most Civil Servants do) and draw his Civil Service pension then and draw his state pension at 65, or 70 as it may be then.
In my mind this is the safest scheme, having read on here and through talking to friends and hearing how insurance based pension schemes have not performed for them. Which is where part of his money would be in the Partnership scheme.

djohn2002uk

Forgot to add, you will get half his pension if he dies first.
Also there is a lump sum payment payable on retirement too, also based on final salary.

Looking at the first post on here they may be removing the lump sum.
I think you need advice from within the Civil Service. Ask your office to put you in touch with the pensions department.

LillieFlower

Thanks djohn,

do you think it might be worth us contacting an IFA to get this sorted out? We need to have decided within the next couple of months otherwise he'll automatically be put into the Premium Scheme and we wouldn't then be able to backdate his contributions if we decided to switch to Partnership. It's all a bit confusing really!

LillieFlower

djohn2002uk

First, there are booklets you can get from his pay department explaining it all and if the premier scheme is as I explained above then I've never known any financial advisor advise against the scheme. That is why you hear so many comments about people who are in receipt of Civil Service pensions, simply because they are about the best you can get.
I will see if I can get some more info on the Partnership scheme but as of now I think it is a way of the government cutting the cost of providing pensions in the Civil Service by offloading some of it to the private sector, i.e. insurance companies along with the risk that that entails.
The only problem I have with seeking advice from an IFA is that if he doesn't sell you "something" he makes nothing. But there is one on here who appears to be very helpful and I'll send him a private message and ask him to contribute to this thread.

djohn2002uk

I've now asked dunstonh to give you his comments. He is a financial advisor.

isasmurf

I think the most important question you have to ask yourself is "How long do I intend to stay in the civil-service" If the answer is most of your career then I would go for the Premium scheme, if you intend it to be a short-term career move then maybe the Partnership may be better.

Have you tried filling in the decisiion maker in the "Your Pension, Your Choice" booklet? It's available on the CS Pension Scheme website

BTW, You are not committing yourself. You are allowed to switch between the two once in each direction. You can only switch on the 1st April or 1st October and you must give 3 months notice.

dunstonh

I cannot give advice on the website but if it was me, I would go with the pension based on years of service. It gives you some certainty without the need for investment returns. If you leave the service, the benefits get increased annually to maintain their real value.

In the pecking order of generalisations, schemes based on years of service are generally the best option.

They are so good, that is why most employers and now the Govt are trying to reduce the benefits by offering new schemes which will safe them money and/or reduce their liability.

The civil service schemes (health service, teachers etc) account for something like one fifth of the pension payments the state makes. Reducing the burden there means they dont have to hit the basic state pension itself in the short term. So, you may find the glossy documentation on the schemes does promote the money purchase (investment backed) schemes more than the years of service schemes.

djohn2002uk

All the details are here: http://www.civilservice-pensions.gov.uk/Menu.asp?MenuIDS=4,245,277

Thanks dunstonh.

LillieFlower

Thank you so much everybody, I think we've decided to go with the premium plan as hubby intends to be with the civil service for quite a bit.

Was just a bit concerned that the premium wasn't as good, mainly because that's the plan that new employees are automatically put on unless they say otherwise. Perhaps I'm being cynical, but I expected that the partnership scheme must be better because the govt tries to put people on the premium one!

I feel much more in control of things now, and have had a good look at the civil service pensions website (thanks djohn!), so thank you all for helping us out! :T