Partial retirement allows you, with the agreement of your employer, to draw some or all of your classic pension and remain in work. There are certain conditions, which you need to be aware of before you apply for partial retirement.
When you decide to retire, it will help if you agree your last day of service with your employer as far in advance as you can. Your employer will tell the Scheme Administrator (MyCSP) who will send you an estimate of your pension benefits, plus a Personal Details Form – this is your pension claim form. You should check the details, complete and sign the form, and return it as quickly as possible.
When you take your pension, you have the option to give up part of your pension to provide benefits for another person. This is known as ‘allocation’ of pension. You may choose to add to the benefits you have already provided for your husband, wife or civil partner, or to provide for another person who is dependent on you.
You need to remember a number of points about allocating part of your pension:
If you are interested in allocating your pension, contact us.
You will receive an annual pension and a one-off lump sum. Your lump sum will be paid direct to your bank or building society account, whichever you indicate on your Personal Details Form.
Your pension will be paid every month, in arrears, directly into your bank or building society account. Your pension will be treated as earned income for tax purposes; any tax that is due is taken off before the pension is paid.
We work out your pension using your pensionable earnings and length of reckonable service.
You should be aware that there is a maximum number of reckonable service years we can use, and that is 45.
Before 1 March 2008, the number of years was restricted to 40 before the age of 60 but you could build up a further five years’ reckonable service for any service from the age of 60 onwards. However, from 1 March 2008, anyone who had already reached their 40 years’ service could start to build up another 5 years’ service, regardless of their age at that time.
So, we work out your pension as follows:
(pensionable earnings x reckonable service) / 80. We work out your lump sum (which, in most cases, is tax free) as follows:
3 x your annual pension
Your pensionable earnings are £20,000, and your reckonable service is 30 years.
Pension = (£20,000 x 30) / 80 = £7,500 a year or £625 a month before deductions.
Lump sum = £7,500 (pension) x 3 = £22,500.
Please note that we will reduce the lump sum should we need to recover any scheme contributions that you owed.
When you take your pension you may be able to give up all or part of your lump sum in return for an increase in either your own pension, or in your own pension and your widow’s, widowers’ or surviving civil partner’s pension. The Scheme Administrator (MyCSP) can give you more information. If you decide to exchange all or part of your lump sum, you must make your decision before your last day of service. If you left service early with preserved benefits, you must make your decision before your pension comes into payment at pension age. Once we start paying your benefits, you cannot change them.
You will be able to choose to give up part of your pension for an additional lump sum. You can choose how much extra lump sum you want up to a maximum set by HMRC. You must give up £1 of annual pension for each £12 of additional lump sum you take.
You can find out how much additional lump sum you can take, and the effect it will have on your pension by using the calculator on the Civil Service Pensions website (or you can ask the Scheme Administrator (MyCSP) to do this for you if you do not have access to the calculator).
Reducing your annual pension in this way generally has no impact on your dependants’ pensions as these are based on your pension before you give any up for a higher lump sum.
However, if you are aged 75 or over when you die, the tax rules on pensions may restrict the total of any dependants’ pensions payable to a maximum of the amount of your pension at the date of your death.
If you take a higher lump sum, your dependants’ pensions may reduce if you die after reaching 75 and leave two or more children under age (or under age 23 if they are in full-time education).
If you are single and eligible for a partial or full refund of WPS contributions on full retirement, you will have less scope to give up pension for an additional lump sum. This is because the total of any WPS refund plus any additional lump sum you choose to take cannot exceed the maximum permitted lump sum.
Please note that from 1 April 2012, you will only receive a refund of the 1.5% WPS contributions paid. You will not receive a refund of the additional contributions above 1.5% paid from that date. See Appendix A for more information about WPS refunds.
Pensions in payment increase every year in line with the cost of living. All pensioners aged 55 or over get these increases. Preserved benefits are also increased to maintain their value up to the date they become payable.
You will also receive the cost-of-living increases if you are aged under 55 and if:
You retire in mid-October with an annual pension of £7,500.
The following April, the cost-of-living increase is 3.5%.
As you retired exactly halfway through the relevant 12-month period, the pension is increased proportionately (that is, by one half of the total increase – 1.75%).
During the second year, the cost of living increase is 4.2%. Your annual pension becomes £7,631.25 after six months and £7,951.76 a year later.
For people with service before 1 April 1980 their pension will be reduced at State pension age to take account of National Insurance modification. Ask the Scheme Administrator (MyCSP) for more details about National Insurance modification.