Civil service is a collection of employees employed by the government who do not work in a political or judicial role. As such, they are known as ‘civil servants’.
Examples include working for the Department for International Trade, Environment Food & Rural Affairs, and the Office for National Statistics.
Those who work in civil service have many benefits that aren’t available to regular working employees. These can include different pay structures, health benefits, and the Civil Service Pension Scheme.
The Civil Service Pension Scheme can be tricky to navigate, which is why this article will explain everything related to it, from what it is, how much your pension payouts will be, how much you have to contribute, and what happens when you die.
The Civil Service Pension Scheme is a ‘defined benefit’ pension offered to employees of government and public bodies. Depending on the civil servants earnings – often called ‘pensionable earnings’ – pension contributions are made. The individual’s pensionable earnings also determine what their pension payouts will be.
The Civil Service Pension Scheme has been around for decades and has undergone numerous changes and iterations. Due to this, the scheme has five final salary sections. Let’s explore this in further detail.
Prior to 30 September 2002, civil servants had a pension scheme called the Principal Civil Service Pension Scheme (PCSPS). This was the only one of its kind and is now known as the ‘Classic’ scheme.
The Classic scheme was a defined benefit pension scheme that used the final salary before retirement to determine the pension payout. You were able to draw from the pension at the age of 60.
On 1 October 2002, a new scheme called ‘Premium’ was introduced. This, too, was a defined benefit pension scheme that used the final salary before retirement to calculate the pension payout.
Members were given the option to choose between staying in the Classic Scheme or switching over to Premium. Much like the Classic scheme, they were able to begin drawing from their pension at the age of 60.
This scheme was a defined benefit scheme that blended Classic and Premium and allowed members to reap the benefits of both schemes.
Those who opted for Classic Plus could keep contributions made before 1 October 2002 in the Classic system whilst keeping contributions made from 1 October 2002 onwards in the Premium system.
Like the previous two schemes, members could draw from their pension at 60.
On 30 July 2007, a new scheme under the name of ‘Nuvos’ was introduced. It was different to the previous iterations in that pension payouts were determined by calculating the individual’s average salary throughout their career.
Members were able to draw from their pension at the age of 65.
The latest iteration of civil service pensions is called ‘Alpha’ and was introduced on April 2015. Another defined benefit pension scheme, the pension payout for Alpha is calculated using the individual’s average salary throughout their career.
Members under the age of 46 years and seven months in the Classic, Classic Plus and Premium scheme, as well as members under the age of 51 years and seven months in the Novus scheme, were automatically switched over to the Alpha scheme on 1 April 2012.
The exact amount you receive will depend on which scheme you are a part of.
The pension paid out to those in the Classic scheme is calculated by multiplying the individual’s pensionable earnings by years of reckonable service and then dividing this total by 80.
For instance, someone with pensionable earnings of £35,000 with 20 years of reckonable service will receive an annual pension of £8,750 [(£35,000 x 20)/80].
Premium scheme pensions are calculated by multiplying 1/60 of the individual’s final pensionable earnings by years of reckonable service.
Using the same numbers as above, the individual will receive an annual pension of £11,666.67 (1/60 x 20 x £35,000).
Since Classic Plus combines the Classic and Premium schemes, two calculations will be made.
One for the years of service before 1 October 2022; these will be done using the Classic formula.
And the second is for the years of service from 1 October 2002; these will be done using the Premium formula. These are then added together to determine an individual’s annual pension.
Novus calculations are done differently than the other schemes since the annual pension is determined by the sum of all pension contributions made each year, plus annual inflation.
For instance, let’s assume an individual has pensionable earnings of £30,000. Under Novus, they contribute 2.3% of their earnings into their pension each year. In Year 1, they will make a total pension contribution of £690.
At the start of Year 2, suppose they receive a pay rise and their pensionable earnings increase to £35,000. In that case, their end-year pension contribution will total £805. At the same time, the contributions made in Year 1 have increased in line with annual inflation of 2%.
This means that at the end of two years, the individual has a pension worth £1,508.80 [(£690 x 2%) + £805)
Pensions in the Alpha scheme work similarly to Nuvos, except that the individual makes a pension contribution of 2.32% each year.
The difference is that the age at which you can draw from your pension is in line with the State Pension age. Since the State Pension age tends to increase as the years pass, so does the age at which you can draw from your Civil Service Pension.
There are several benefits associated with a Civil Service Pension Scheme that apply to both yourself and your spouse/civil partner and dependants.
Benefits to you
- Amongst public sector employees, member contribution rates are some of the lowest
- Superior employer contributions
- Contributions are adjusted for inflation
- Ability to increase your pension contributions
- Access to ill health and injury benefits if it restricts your ability to work
- Life assurance cover
- Possibility to transfer existing pensions over
- Option to draw tax-free lump sum in retirement
Benefits to spouse or civil partner and dependants
- Can nominate a recipient to receive a tax-free lump sum if you die
- Pension scheme for your spouse or civil partner
- Pension for children
- Life assurance cover
- Widow’s or Widower’s refund
Regardless of what iteration of the Civil Service Pension Scheme you fall into, your annual pension contributions will be the same since they depend on how much money you earn.
For the current 2022/23 period (1 April 2022 to 31 March 2023), member contribution rates will be as follows:
|Annual pensionable earnings||Contribution rate|
|Between £0 and £23,100||4.60%|
|Between £23,101 and £56,000||5.45%|
|Between £56,001 and £150,000||7.35%|
|£150,001 or more||8.05%|
Employer contributions for public service pensions are much higher than those for workplace pension schemes and are one of the major benefits of working in the civil service sector.
For the current 2022/23 period (1 April 2022 to 31 March 2023), employer pension contributions are set at the following rates:
|Annual pensionable earnings||Contribution Rate|
|Between £0 and £23,000||26.6%|
|Between £23,001 and £45,500||27.1%|
|Between £45,501 and £77,000||27.9%|
|£77,001 or more||30.3%|
Suppose you take a break from your civil service career – whether it’s due to a change of industry or a hiatus from work altogether – your Civil Service Pension will be affected.
Classic, Classic Plus, or Premium
If you are part of the Classic, Classic Plus, or Premium schemes, since you will not be paying contributions towards your pension, you won’t accumulate reckonable service years.
This could impact how much you receive in your pension come retirement. However, once you return to work in civil service, you will pick up where you left off.
If you are a part of the Nuvos scheme, you will be unable to contribute to your Civil Service Pension. Therefore, you will not build any additional pension.
If you are part of the Alpha scheme, the outcomes will vary depending on how many years of service you had prior to leaving.
Suppose you left before accumulating two years of service. Since you have not built up sufficient qualifying service to be eligible for a pension, you can either get a refund on your contributions minus deductions or receive a cash transfer and purchase other benefits with a different pension scheme.
In such an event, once you re-enter the work of civil service, you will be treated as a new entrant.
On the other hand, if you leave after accumulating two years of service and have not reached the minimum age to draw from your pension, you will receive a ‘preserved pension’.
A preserved pension is simply the pension you have built up until your break and will be adjusted each year in line with the current prices. Upon re-entering, you will be eligible to receive Alpha benefits.
One of the many advantages of a final salary pension is that your savings are passed on to your heir or nominated recipient. If you do not have a nominated recipient, it will be paid out to your personal representative.
The total amount passed on depends on which scheme you fall into and whether you are still working or retired.
If you pass away while still working, a lump sum of two times your pensionable earnings will be issued to your nominated recipient, and your spouse or civil partner will receive 50% of an enhanced pension.
If you pass away within five years of retirement, your nominated recipient will be issued a lump sum payment. The amount will be calculated by subtracting five times the annual pension on the date of death by the total amount of lump sum and annual payments received. In addition, your spouse or civil partner will receive 50% of your pension.
If you pass away while still working, a lump sum payment of three times your pensionable earnings will be issued to your nominated recipient. In addition, your spouse or civil partner will get a pension. This is calculated as 1/60 of your final pensionable earnings for each year of service in the scheme multiplied by 37.5%. Up to 10 years can be added to your service length if you die whilst still in service.
If you pass away within five years of receiving pension payments, a lump sum payment will be made to your nominated recipient. This is determined by calculating the annual rate at the time of death and the remaining amount to be paid for those five years.
In addition, your spouse or civil partner will receive a pension worth 37.5% of your pension before any of it was given up for a lump sum.
If you pass away while still working, a lump sum of three times your pensionable earnings will be issued to your nominated recipient. In addition, your spouse or civil partner will receive 50% of your pension accumulated on your service before 1 October 2002 and 37.5% of your pension accumulated on your service after this date.
If you pass away after you have retired, your nominated recipient will be issued a lump sum payment. This will consist of two years’ pension accumulated on service prior to 1 October 2022, plus five years’ pension accumulated after this date.
If you pass away while still working, a lump sum of two times your pensionable earnings will be made to your nominated recipient. In addition, your spouse or civil partner will receive a pension, which is calculated based on 37.5% of the pension you would have been eligible for.
If you pass away within five years of having drawn into the pension, your nominated recipient will receive a lump sum balance of five years’ pension. In addition, your spouse or civil partner will receive their own pension, calculated as 37.5% of the pension you receive.
With an Alpha pension, if you pass away while still working, a lump sum payment of two times your pensionable earnings will be issued to your nominated recipient. In addition, your spouse or civil partner receives their own pension, calculated as 37.5% of the pension you would have been eligible for.
If you pass away after you have retired, a lump sum payment will be issued to your nominated recipient of five times your annual pension payments, minus pension payments and lump sums received before passing. In addition, your spouse or civil servant will receive their own pension, calculated as 37.5% of the pension you receive.
The details of your Civil Service Pension Scheme will depend on when you joined the scheme. But in each case, your pensionable earnings will determine your overall pension contributions and how much you are paid out during retirement.
The Civil Service Pension has many benefits, such as low member contribution rates, employer contribution rates that far exceed those in regular workplace pensions, and pension schemes offered to your spouse or civil partner after death.