Civil service pensions - frequently-asked questions
2. If I go before 65, how much would my pension be reduced?
3. Can the government make these changes? I thought I was contractually entitled to my pension terms.
5. I'm in the Research Councils scheme, how do the proposals affect me?
6. Surely a 'Whole Career' scheme will offer worse pensions to most staff?
8. Isn't that a bit like a money purchase scheme?
1. Will I have to work to 65?
No, there is nothing in the proposals which affects your ability to retire (or indeed, to continue in work) if you wish. But if you do work on, the proposals would allow you to continue accruing pension, at a faster rate, without any limit on years of reckonable service. Use the ready reckoner on www.civilservice-pensions.gov.uk/consultation to find out how your pension would potentially be affected.
2. If I go before 65, how much would my pension be reduced?
If you went before 60, then all your pension would be reduced, probably by 4-5% for each year it was drawn early. If you retire between 60 and 65 (which the vast majority of civil servants already do) then only pension earned after April 2013 would be reduced for early payment, probably by a similar amount.
3. Can the government make these changes? I thought I was contractually entitled to my pension terms.
4. I left the civil service on privatisation and joined a broadly comparable scheme. How do the proposals affect me?
They won’t. There is no effect on those who have a deferred pension in PCSPS, and no read-across from PCSPS to broadly comparable private sector schemes.
5. I’m in the Research Councils scheme, how do the proposals affect me?
In exactly the same way as if you were in PCSPS. Our understanding is that the By-analogy schemes will follow exactly whatever is agreed for the PCSPS. Prospect will therefore be consulting members in these schemes at the same time as members in PCSPS.
6. Surely a “Whole Career” scheme will offer worse pensions to most staff?
Not necessarily. It’s certainly true that a career average scheme will provide a lower pension than a final salary scheme with the same accrual rate, for anyone whose earnings outstrip inflation. But these proposals are offering significantly faster accrual. This could be of benefit for example to specialists who cannot join the civil service until later in their careers, or to those who take a career break for caring responsibilities. The removal of the current limits on pension accrual also mean that those with long unbroken service could obtain a higher pension than under the current arrangements. Prospect believes that the proposals provide a negotiating opportunity and should be considered seriously.
7. How could the various pensions administrators administer anything this complicated? No one has accurate pay records for their past service.
Past pay records won’t be needed, because the changes would only affect future service. There is absolutely no question of benefits already earned being recalculated on a career average basis. In future, if the proposals are accepted, pension would build up rather like an account in a building society: according to the Cabinet Office, each scheme member would get an annual statement showing how much pension they had earned in the year, and how much the pension earned in previous years had been uprated. So scheme members would always know how much their pension would be.
8. Isn’t that a bit like a money purchase scheme?
Absolutely not. In a money purchase scheme the contributions are invested, and could go down rather than up. At retirement, the money has to be used to buy a pension (an annuity). So members in a money purchase scheme can’t tell in advance how much pension they will get. That is not what is being proposed for the civil service, though the vast majority of private sector employers (if they provide pensions at all) only provide money purchase benefits for new employees.