Civil Service Pensions - What's the catch?

[Sycamore]

Hi all,

I've seen that there are quite a few interesting looking roles at various places within the CS, but the thing that stands out is the insane looking pension contributions? I'm seeing them with ~29.5% contributions? What's the catch, or is there one? Currently I have a 5% employer match

Salaries look lower than the private sector, but I'm assuming the pension and WFH perks make up for it?

I'm 30 and have been in engineering since I was an apprentice at 16, but I'm just generally becoming tired of it so I'm looking for a change of scenery.
Working in the glacial nuclear sector likely isn't helping, but the money is better. I'm aware any move to the CS would realistically come with a drop in salary.

Cheers.

[Fast and Spurious]

[Countdown]

Sycamore said:

Hi all,

I've seen that there are quite a few interesting looking roles at various places within the CS, but the thing that stands out is the insane looking pension contributions? I'm seeing them with ~29.5% contributions? What's the catch, or is there one? Currently I have a 5% employer match

Salaries look lower than the private sector, but I'm assuming the pension and WFH perks make up for it?

I'm 30 and have been in engineering since I was an apprentice at 16, but I'm just generally becoming tired of it so I'm looking for a change of scenery.
Working in the glacial nuclear sector likely isn't helping, but the money is better. I'm aware any move to the CS would realistically come with a drop in salary.

Cheers.

Depends on what you mean by "catch".

Historically Public Sector pensions were "defined benefit". The employee paid in a predetermined amount, the employer paid in whatever was needed to fund the Final salary pension. The employer contribution could be very low if the pension fund was doing amazingly well, or it could be very high if the fund was in deficit.

It looks like what they have done is to change from a DB scheme to a DC scheme and in order to placate the staff/unions they are offering a huge employer contribution.

In short - the pension they're offering is not as good as a DB/Final salary scheme but they're offering a huge employers contribution instead

ETA whilst it may look "insane" it's not a lot more than some councils are having to pay, the biggest benefit is that it removes any "Past Service Cost" liability.

[Sycamore]

Countdown said:

Depends on what you mean by "catch".

Historically Public Sector pensions were "defined benefit". The employee paid in a predetermined amount, the employer paid in whatever was needed to fund the Final salary pension. The employer contribution could be very low if the pension fund was doing amazingly well, or it could be very high if the fund was in deficit.

It looks like what they have done is to change from a DB scheme to a DC scheme and in order to placate the staff/unions they are offering a huge employer contribution.

In short - the pension they're offering is not as good as a DB/Final salary scheme but they're offering a huge employers contribution instead

ETA whilst it may look "insane" it's not a lot more than some councils are having to pay, the biggest benefit is that it removes any "Past Service Cost" liability.

Top man, thank you. Very helpful

[Countdown]

Sycamore said:

Top man, thank you. Very helpful

Glad it made sense

[The Leaper]

And all paid for by the tax payer.

[Countdown]

The Leaper said:

And all paid for by the tax payer.

Not just their pensions. Their salaries are also paid for by the taxpayer, as well as work related expenses. It's shocking!

[basherX]

Don’t be too sure it’s a DC pension.

Taking this as an example: https://www.civilservicejobs.service.gov.uk/csr/in...

Then the pension on offer is this: https://www.civilservicepensionscheme.org.uk/joini...

Which is a DB offering.

The contribution rate they’re offering is an actuarial estimate of the cost of the benefit.

[Len Clifton]

Civil service “alpha” pension is still defined benefit. It’s based on average earnings over your career x years served. The longer you spend working, the more you get. You can watch it grow year on year, confident it will never decrease, unlike defined contribution. Employer contribution is about 28% but that’s so they can pay the defined benefit, which is the number you’re really interested in.

Civil service is an interesting career and they are a good employer. I’ve worked in both and spent 25 years in the private sector. I prefer the civil service, and like the people and the scale/complexity of the work. Contrary to popular belief, they employ very smart, hard working people and there’s a lot of competition.

[Countdown]

basherX said:

Don’t be too sure it’s a DC pension.

Taking this as an example: https://www.civilservicejobs.service.gov.uk/csr/in...

Then the pension on offer is this: https://www.civilservicepensionscheme.org.uk/joini...

Which is a DB offering.

The contribution rate they’re offering is an actuarial estimate of the cost of the benefit.

I stand corrected - with them seemingly offering a fixed %age i assumed it was DC.

[basherX]

Countdown said:

I stand corrected - with them seemingly offering a fixed %age i assumed it was DC.

I don't blame them- we used to do the same for our corporate DB because it was (when these things were more common) very hard to get employees to recognise the value that they're receiving despite it (potentially) costing the employer a fortune.

In a corporate environment the quoted percentage was just a huge estimate because it was so dependent on market rates. Even in the public sector I think the discount rate varies over time so it's no more than an educated guess I presume.

[Zigster]

Civil Service pensions are definitely DB, and the value probably more than closes any typical basic pay gap between public sector and private sector jobs.

Some (Most? All?) changed to career-average rather than final salary for future service after a certain date. The impact on the eventual pension depends on a lot of factors, not least salary progression in the years running up to retirement.

The 29.5% mentioned will probably be the amount the Civil Service employer gets charged rather than an explicit contribution to your pension. Compared to the “real” cost of buying a fully index-linked pension as an annuity, it’s probably a bit low. Either way, it is a helpful indication of just how valuable Civil Service pensions are - if you have a Civil Service (or other public-sector) job and are able to join the pension scheme you should almost certainly do so.

[xx99xx]

Depends when you need your money.

Now = private sector: higher salary, better standard of current living but not so great pension

When you retire = public sector: lower standard of current living but retire in comfort

Given that future health is not guaranteed, you might want to make the most of the present. A great pension is only great if you're able to use it.

However, there are other benefits of working in the public sector, not just pensions.

If anyone feels hard done by, paying tax that contributes towards public sector workers pensions, there are loads of public sector jobs currently available if you'd like to earn less but have a smug pension.

[Silvanus]

xx99xx said:

Depends when you need your money.

Now = private sector: higher salary, better standard of current living but not so great pension

When you retire = public sector: lower standard of current living but retire in comfort

Given that future health is not guaranteed, you might want to make the most of the present. A great pension is only great if you're able to use it.

However, there are other benefits of working in the public sector, not just pensions.

If anyone feels hard done by, paying tax that contributes towards public sector workers pensions, there are loads of public sector jobs currently available if you'd like to earn less but have a smug pension.

Not sure about the wider public sector, but a very high percentage of current Civil Service roles are on fairly short fixed term contracts.

[Len Clifton]

xx99xx said:

Depends when you need your money.

Now = private sector: higher salary, better standard of current living but not so great pension

When you retire = public sector: lower standard of current living but retire in comfort

Given that future health is not guaranteed, you might want to make the most of the present. A great pension is only great if you're able to use it.

However, there are other benefits of working in the public sector, not just pensions.

If anyone feels hard done by, paying tax that contributes towards public sector workers pensions, there are loads of public sector jobs currently available if you'd like to earn less but have a smug pension.

That very much depends on what grade you join at and how close to the end of your career you join. For example, Grade 6 software architect or engineer pays up to £110k with the pension on top of that. You’ll also get job security and the chance to try different jobs in the same gov department or opportunity to move between them. Top pay at director level is about £165k, again with the pension. I feel very fortunate to have some pension provision behind me now. If most of us do the maths, we realise we have nowhere near enough for retirement.

I’d also argue, if you aren’t in the best of health in later life, last thing you want to be doing is working. Unless you do a job you love.

Edited by Len Clifton on Tuesday 11th March 07:18

[Cheekster247]

Len Clifton said:

That very much depends on what grade you join at and how close to the end of your career you join. For example, Grade 6 software architect or engineer pays up to £110k with the pension on top of that. You’ll also get job security and the chance to try different jobs in the same gov department or opportunity to move between them. Top pay at director level is about £165k, again with the pension. I feel very fortunate to have some pension provision behind me now. If most of us do the maths, we realise we have nowhere near enough for retirement.

I’d also argue, if you aren’t in the best of health in later life, last thing you want to be doing is working. Unless you do a job you love.

Edited by Len Clifton on Tuesday 11th March 07:18

I'm a grade 6 in the civil service and I've NEVER seen a G6 role for £110k!....nowhere near that amount with London weighting.. Please send me links

[Sport_Turismo_GTS]

Zigster said:

Civil Service pensions are definitely DB, and the value probably more than closes any typical basic pay gap between public sector and private sector jobs.

Some (Most? All?) changed to career-average rather than final salary for future service after a certain date. The impact on the eventual pension depends on a lot of factors, not least salary progression in the years running up to retirement.

The 29.5% mentioned will probably be the amount the Civil Service employer gets charged rather than an explicit contribution to your pension. Compared to the “real” cost of buying a fully index-linked pension as an annuity, it’s probably a bit low. Either way, it is a helpful indication of just how valuable Civil Service pensions are - if you have a Civil Service (or other public-sector) job and are able to join the pension scheme you should almost certainly do so.

Don’t forget those advertised as ‘career average’ and thus often viewed as less generous than ‘final salary’ schemes, are normally CARE schemes I.e. career average REVALUED earnings, where the revaluation rate is inflation PLUS a margin. This means that, where employees earnings are not actually increasing as high as the revaluation rate, they are actually more valuable than a final salary scheme and cost the taxpayer much more.

[xx99xx]

Len Clifton said:

I’d also argue, if you aren’t in the best of health in later life, last thing you want to be doing is working. Unless you do a job you love.

Edited by Len Clifton on Tuesday 11th March 07:18

My point was more about the people who stick with public sector all their life because it gives them a great pension. During their career, they probably earn less than an equivalent role in private sector but they make do with an average lifestyle and look forward to a premium retirement.

Then when they retire, either at normal age or slightly early, within 5-10 years they either die or are in such poor health they have little use for their great pension. It's happened a few times with people I used to work with.

[Countdown]

Sport_Turismo_GTS said:

Don’t forget those advertised as ‘career average’ and thus often viewed as less generous than ‘final salary’ schemes, are normally CARE schemes I.e. career average REVALUED earnings, where the revaluation rate is inflation PLUS a margin. This means that, where employees earnings are not actually increasing as high as the revaluation rate, they are actually more valuable than a final salary scheme and cost the taxpayer much more.

I think it's swings and roundabouts.

The CARE scheme is better for people who stay in the same or broadly the same pay grade for their entire working career. The FS scheme was much better for people who had regular career progression / promotion.

Somebody I used to work with got a £10k bonus in his last year of working. he had something like 35 years of service which meant an extra £4.4k a year pension. had it been a CARE scheme it would have been a lot less.

[MitchT]

The OH has worked in the private sector and CS doing comparable work. The combined pension and salary is about the same across both, but with the pension occupying a much larger proportion in the CS, so you get less say in how to utilise your income. Not ideal if your priority is getting on the property ladder.