We work out your pension as 1/60 of your final pensionable earnings for every year of reckonable service in the scheme.
Mohammed leaves premium after 20 years’ reckonable service. His final pensionable earnings are £18,000 a year.
Mohammed’s premium pension
= 1/60 x 20 x £18,000 =£6,000 a year.
The maximum length of reckonable service that can count towards your pension is 45 years. However, before 1 March 2008, the number of years was restricted to 40 years. So, if you had built up 40 years before 1 March 2008, you could not build up any more pension until that date.
If you were a member of classic on 30 September 2002 and chose to join premium from 1 October 2002 your reckonable service in classic will have been converted into premiumreckonable service. You will have been told at the time how many years of reckonable service you would receive in premium in exchange for your years of classic reckonable service.
In most cases the conversion rate will have been 0.92 years of premiumreckonable service for every year in classic but, depending on your circumstances, you may have had slightly less.
What if I work part time?
If you work part-time we will work out your pension by using a full-time equivalent rate for your pensionable earnings and by counting your reckonable service on the basis of the hours you actually work. We will add together periods of full- time and part-time service.
Jenny works full-time for 25 years and then works part-time (18 hours a week instead of the full-time 36 hours) for 10 years. When Jenny retires, her actual pensionable earnings in the last 12 months are £10,000. Her full time equivalent final pensionable earnings are £20,000.
Jenny’s reckonable service is 25 + (10 x 18/36) = 30
Jenny’s premium pension is 1/60 x £20,000 x 30 = £10,000 per year.
Annual Benefit Statements provide members with a summary of their Civil Service pension benefits, up to the date of the statement each year, based on your current salary.
Do I get a tax-free lump sum?
When you retire you can choose to give up part of your pension for a tax-free lump sum. You can choose how much extra lump sum you want to take up to a maximum set by HMRC. Other restrictions may apply if you left the scheme before 1 October 2007.
You must give up £1 of annual pension for each £12 of lump sum you take. You can find out how much lump sum you can take, and the effect it will have on your pension by using the calculator.
Tom retires after 30 years’ service with a pension of £10,000 a year.
He has an option to take a tax-free lump sum of up to £42,857.14. If Tom chooses to take the maximum tax-free lump sum, he will have to give up a pension of £3,571.43 a year. This means that Tom can choose:
a pension of £10,000 a year; or
a maximum single tax-free lump sum of £42,857.14 plus a pension of £6,428.57; or
some other combination of pension and lump sum up to the maximum allowed.
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 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 lump sum, your dependants’ pensions may be reduced if you die after reaching 75 and leave two or more children under age 18 (or under age 23 if they are in full-time education).