Date posted: 20/05/2015
Audience:
This notice will be of particular interest to:
- Pension leads; and
- Any staff connected with managing early exit exercises
Action:
- Note the new information about the Civil Service Compensation Scheme (CSCS) set out below following the introduction of alpha from 1 April 2015, and the detailed guidance provided at Annex A;
- Note that the position on alpha employer 'top-ups' has changed from a previous proposal; and
- Note that the changes to the CSCS mean employers need to introduce steps in their early exit processes to identify employees with other Civil Service employment.
Timing:
Detail
- The introduction of alpha on 1 April 2015 has implications for compensation payable under the CSCS, and other changes have been made to the CSCS that will affect early exit exercises.
- More information is set out below, and detailed guidance has been provided at Annex A.
Impact of alpha on employer top-up to compensation in early exit exercises
Please note that this position has changed from a previous proposal.
- Employers can top-up compensation to allow for the buyout of the actuarial reducation that is usually applied on early payment of a pension if the member is over the minimum pension age for that pension. This means that if a Principal Civil Service Pension Scheme (PCSPS) member has moved to alpha and is over age 55 (i.e. over the minimum pension age in both the PCSPS and alpha), you can top-up compensation to the extent necessary to buy out the reductions applying to their PCSPS pension and their alpha pension.
- If a member with a minimum PCSPS pension age of 50 and minimum alpha pension age of 55 leaves on early exit between the ages of 50 and 55, you may top-up their compensation if necessary to buy out the actuarial reduction in their PCSPS pension. Their alpha pension will be preserved until they decide to draw it (which can be at any time from age 55).
Impact of alpha on compensation for older workers
- Once a member moves to alpha (or is eligible to join alpha but has opted out of the pension scheme), their compensation will be reduced if they are approaching, or over, Normal Pension Age (NPA) - by reference to their NPA in alpha (which is the higher of age 65 and their State Pension age) i.e. higher than it is currently for most PCSPS members.
Only active members are eligible for employer top-up to compensation
- The CSCS rules have been amended to clarify that only active PCSPS or alpha members are eligible to have their compensation topped-up to buy out the actuarial reduction in their pension. Therefore, individuals who have opted out of the pension scheme are not eligible.
All Civil Service employment must be left for CSCS compensation to be payable
- The CSCS rules have been changed to help clarify that compensation from the CSCS is only payable if an individual has left all employment covered by the Civil Service compensation arrangements (this includes employment with various public bodies and organisations as well as Government departments but, for simplicity, the relevant employers are referred to below as 'Civil Service employers'). You must introduce steps in your early exit process to check that individuals leaving with compensation do not have another job with a Civil Service employer.
Compensation In Lieu of Notice (CILON)
- The CILON payable to an individual will depend on which pension scheme (PCSPS or alpha) they are in on their last day of service. New calculators have been put on the Civil Service Pensions website, and further information has been provided in EPN433.
Contact
If you have a question about the distribution of EPNs contact employerpensionnotice@cabinetoffice.gov.uk.
You can find electronic copies of the Employer Pension Guide, all current EPNs and forms on our website.
This notice is for employers and should not be issued to scheme members.
If members have a question about their pension they can find information on this website or by contacting MyCSP.
Attachments
