PCS and civil service pensions
PCS has led the way in defending occupational pensions in the public sector. It is now widely accepted that the undermining of pension provision by successive governments has been damaging and wrong.
Increased rates of employee contribution at a time when members have seen the value of their undermined by government pay policy, and the detrimental changes to normal scheme pension age, have been consistently opposed by PCS.
Our members’ continued support for our pension campaigning, including taking action, means there is an occupational pension scheme with high value benefits available in the civil and public service and we believe this should be the first and best choice for dignity and security in retirement. PCS is represented on the pensions advisory board and works actively to improve the schemes and safeguard future pension benefits through regular engagement with the Cabinet Office.
Civil service pension options
Most civil servants are members of the Civil Service Pension Scheme (CSPS) also referred to as Alpha Pension. Alpha is a “career average” defined benefit scheme. It has a good rate of accrual and it means members can plan for financial security in retirement. Some occupational pensions are based on defined contributions which means that the benefits are based on the value of the contributions made and the return on the investments made by the pension fund ad their value is not guaranteed. There is a defined contribution scheme in the civil service known as Partnership Pension.
When Alpha was introduced in 2015 members who were aged over 50 on 1 April, 2012 were able to remain in their legacy scheme. Other members switched to Alpha either on 1 April, 2015 or subsequently with some transitional protection depending on their age on 1 April, 2012 but with part of their legacy scheme benefits preserved.
The legacy schemes are Classic, Classic Plus, Premium and Nuvos. The rules for each scheme are different. Information is available via the Civil Service Pensions website.
- Read the guide for Classic
- Read the guide for Classic Plus
- Read the guide for Premium
- Read the guide for Nuvos.
Pension contributions are a percentage of your pensionable earnings. From 1 April, 2015 there is a single set of contribution rates across civil service pensions, regardless of whether members are in Classic, Classic Plus, Premium, Nuvos or Alpha. Read the current contribution rates. Tax relief applies in each case.
The benefits of Alpha pension include:
- A defined benefit career average scheme
- An accrual rate of 2.32%
- Re-valued annually by Consumer Price Index (CPI)
- Members can exchange some of their pension for a tax-free lump sum on retirement (for each £1 of annual pension given up, members receive £12 of lump sum)
- Ill health retirement benefits
- Lump sum death benefits
- Payments to unmarried partners.
The preserved benefits are those benefits which were guaranteed at the point you switched to Alpha. If you accrued benefits in those schemes you will benefit from them even though the schemes are now closed to new entrants but the reckonable service for the preserved benefit calculation stopped at the point the pension switched. It means your pension when you retire will be made up of two elements and there may be different stages at which you can choose to access the elements of your pension. If you retire you can access preserved benefits in Classic, Classic Plus and Premium at age 60 and Nuvos at age 65. The salary used in the calculation is that at the point of retirement, not the point of switching. This is important to understand if you plan to reduce your hours in the years before you retire. Not all benefits of the legacy scheme are preserved. Death benefits, for example, will be under Alpha rules - read further information in the scheme guide.
Schemes involving cashing in an occupational pension such as those being marketed as “draw down” are not available to members of public service pension schemes but may be available in some funded “by analogy” schemes for former civil servants. The Financial Conduct Authority (FCA) guidance for financial advisers says “defined benefit pensions, and other safeguarded benefits providing guaranteed pension income, give valuable benefits so most consumers will be best advised to keep them”. You should always take advice from a professional financial advisor (IFA) before deciding to transfer your pension.
Partnership is a defined contribution (DC) scheme available to civil servants. The employer will make contributions and employees can choose whether to make a contribution and how much. A personal pension pot is built up and the size of the pot at retirement will depend on the contributions made and the returns on investments (after charges). This is different to the Civil Service Pension Scheme (Alpha) which offers a government backed defined level of benefit that doesn’t depend on investment returns and is inflation proofed.
Additional voluntary contributions are extra payments you can make into a separate defined contribution pension fund with the scheme’s AVC provider. The amount of pension you can get when you retire depends on how much you pay and how your fund is invested. A decision to make voluntary contributions is a personal one and should be taken after consulting an independent financial adviser.
Subject to the auto enrolement process employees can opt out of the pension scheme. If you want to understand more about what opting out of the pension scheme means for you read an opting out factsheet. PCS cannot advise you about a decision to opt out of the scheme. That is a personal decision, and should be taken after consulting an IFA. Information on finding an IFA is available via the Financial Conduct Authority.
Claiming your pension
You should inform your employer’s HR department at least six months before the date on which you wish to retire and claim your pension. They will liaise with the pension administrator MyCSP to ensure you receive the correct pension at the right time. If you are applying to receive your pension benefits and you are not in civil service employment you should contact MyCSP directly.
You can claim your pension when you reach the age prescribed in the scheme rules which is referred to as normal pension age (NPA). At this point you can choose to retire and the full value of your benefits accrued under the scheme are payable without any reduction.
- NPA in Classic, Classic Plus, and Premium is age 60
- NPA in Nuvos is 65
- NPA in Alpha is the same as your state pension age.
You may be able to claim your benefits earlier if your employer agrees but you must have reached your minimum pension age which will be ten years earlier than your NPA. If your pension is paid early it will be subject to an actuarial reduction because it will be in payment for longer. The earlier you claim your pension the greater the amount of the reduction will be. The rate of reduction is based on an actuarial table which varies but for rough calculation you should assume that it will be 5% for each year prior to NPA.
Ill health retirement
If you have to give up work before your NPA you may be able to apply for ill health retirement (IHR). IHR is not subject to a minimum pension age and actuarial reduction is not applied. It will be payment of your actual or enhanced accrued benefits. Your health condition must, in the opinion of the scheme medical adviser (SMA), permanently prevent you from being able to do your current job or a similar post. Permanent means until you will reach state pension age. If, in the opinion of the SMA your health condition prevents you being employed to any extent your pension may be enhanced. To apply you should discuss with your employer in the first instance.
Scheme members wishing to move in stages from work to retirement can opt to partially retire. The option is available to all active scheme members but is subject to employer agreement. You cannot use it to increase your income and pension above the limit may be abated. To qualify you must:
- Be over minimum pension age
- Have built up some scheme pension
- Be able to reduce your earnings by at least 20% by cutting your hours or working in a differently graded job role.
You should always look at the full information before taking this option as partial retirement can affect other conditions of your employment. Read a guide to partial retirement.
Keeping track of things
As an active scheme member you will receive an annual benefit statement. These are currently issued each summer and should be kept for reference. It is also a good idea to check your state pension.
If you think your information is wrong or that scheme rules have been wrongly applied you should first contact MyCSP. You can also contact PCS via your local representative. Find out about the complaints process.
If your need information about your pension and your employer is not part of the Civil Service Pension Scheme contact your local representative in the first instance.