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Pension pot size

The number of civil servants pocketing annual pensions of over £100,000 has tripled, fuelling calls for Rishi Sunak to crack down on Whitehall pay.

The surge in six-figure retirement incomes for mandarins comes after all public sector pensions were hiked by 10pc in April to keep pace with inflation.

I know there’s a difference in valuation between a pension pot with actual money in it and a DB pension of this type.

But there’s no way a £100k pa pension isn’t worth more than the maximum pension pot before the 55% tax rate kicks in. So, are they paying it or not?

7 thoughts on “Pension pot size”

  1. The extra tax is a one-off:

    If you retire having breached the LTA, you will receive a 25% tax charge and your pension will be reduced. This reduction in is a one-off and permanent reduction.

    If you wish, you can request for your lump sum to be reduced instead, which incurs a one-off 55%

    I know nothing of this area, but my reading is that you just pay the tax once; then future inflation-linked increases are exempt. For example if you retired in 2019 and paid 55% on the amount of your lump sum that went over your LTA; then even if your inflation-linked pension subsequently goes over the limit (annual amount x20), you don’t pay again.

  2. I’ve no doubt the numbers of £100k+ pensioners are increasing (because of inflation, if nothing else), but I doubt the absolute numbers are very large. To get a pension of £100k, you’d need:
    a. to have retired on a salary of over £150k (Cabinet Secretary is on £200k);
    b. have done a full 40 years service; and
    c. be on the old final salary scheme, which I’ve read(?) is being replaced by average earnings.

    Now, there’s Whitehall civil service, and then civil servants more generally – the Head of HS2 is on over £600k, but I doubt they get the full civil service pension (they certainly haven’t done 40 years service).

  3. The Lta is tested when you start to draw pensions. One can draw one pension and then pay into another at the same time complicating the situation.

    100k uncapped index linked with spousal benefit was vastly expensive, well over the 20x in the LTA calc. The calc wasn’t updated so us suckers with DC pensions got screwed. Another way the state servants have it better than us plebs

  4. Some bloke on't t'internet

    Tripled could mean anything, they might have been just one before, now there are three – that’s hardly a big issue. Also remember that there are around 480k people who fall under the umbrella of civil servant, so it’s not hard for a pretty small proportion to make up a large sounding number. As Chris points out, you’d need to be on a good salary and have a longish career to be hitting that figure. It’s also career average, not final salary, so getting promotions/pay rises later in your career doesn’t necessarily get you much extra pension – I’ve earned about £2k/year so far.
    Just a cursory look, we get 2.32% of our salary added each year – so ignoring inflation it would take 43 years to get 100% of your salary. Assuming you didn’t start out on £100k/year, you’d have to be earning a LOT more than that to get £100k/yr in pension. There is the annual adjustment which is supposed to match inflation, but not the sort of compound returns from investment you’d hope an investment funded pension pot would give you.

    Ah, so I look at the article, and there’s clear cherry picking of sensationalist figures. The actual number involved is said to be 141, that’s under 0.03% of the workforce. So no, not a large figure at all – for everyone getting that headline figure, there are 3,400 others who won’t be getting it.
    Then the article makes a classic play by comparing apples and oranges. It says that the number of people getting £50k or larger pensions has jumped to 4,741 – so less than 1% of the civil service. But then points out that the average across all workplace pensions is “just” £10,700. I bet there are a lot more than 5k people getting £50k or more from private pensions – just by virtue of there being a lot more in employment in the private sector. I would wager that the average pension across the civil service as a whole doesn’t look a whole lot better since we have a lot of low paid people. Note, there are now FOUR grades in the MoD on the NLW – and some will have done a whole career in the lower grades. By the time I retire, I expect my civil service pension to be well under that £10,700, plus what I’ve saved in DC schemes with private employers – but I bet the same people misusing these stats won’t want to know about that.

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