Common reasons members opt out of their Civil Service pension

Although it may seem that you’re paying a large percentage of your pay towards your pension, your pension contributions are not taxed and therefore your contributions actually cost you less than the rate shown on your payslip. Your tax is worked out on your pay after your pension contributions have been taken.

If you’re an existing member of classic, classic plus, premium, nuvos or alpha you can choose to switch to the partnership pension account. With a partnership pension account, you decide how much you contribute. You don’t even have to make any contributions yourself and your employer will still contribute. If you do decide to contribute, your employer will also match your contribution up to an additional 3%.

To switch to the partnership pension account, you must complete a Pension Switching form and return it to your employer two months before the date you want to switch. You don’t need to complete an opt-out form if you want to switch. 

Further information about the partnership pension account can be found on the dedicated partnership pension account page.

It’s never too early or too late to start building up a pension, but the earlier you start the better your pension will be. Think about the lifestyle you want in retirement, and how this will be paid for. For example, if you like to have holidays abroad, how much does that cost and how will this be paid for once you retire?

If you leave or opt out within one month of being enrolled into the scheme, your employer will automatically refund any contributions that you have made, less a deduction for tax. 

If you leave or opt out after one month but under three months, and you’re under normal pension age, your employer will automatically refund any contributions that you’ve made, less a deduction for tax.  This will happen if you don’t already have a preserved award in the Civil Service pension scheme or haven’t had a transfer value paid in from a personal pension. If you’re over normal pension age you’ll receive a pension award. 

If you leave, or opt out with more than three months, but less than two years’ service, and are under normal pension age, you may be able to transfer the value of your pension to another scheme, or you can get a refund of your contributions, less a deduction for tax. This will happen if you don’t already have a preserved award in the Civil Service pension arrangements or have not had a transfer value paid in from a personal pension. If you are over normal pension age you’ll receive a pension award. 

If you’ve more than two years’ service your pension will be ‘preserved’ and held in the scheme until you claim it, or apply to transfer the value of your preserved pension to another pension scheme. 

If you have a partnership pension account, you can take it with you when you leave.

It’s worth remembering that your pension contributions are not taxed and therefore cost you less than the rate shown on your payslip.

As an alternative to opting out, have you considered switching to the partnership pension account?  The partnership pension account is a Defined Contribution (DC) scheme, where any contributions made are invested to provide a pot of money to fund your retirement. With a partnership pension account, you decide how much you contribute. You don’t even have to make any contributions yourself and your employer will still contribute. If you do decide to contribute your employer will also match your contribution up to an additional 3%. You can take your partnership pension account with you if you leave, and if your circumstances change you can switch back to your previous scheme (depending on eligibility).

More information can be found on the dedicated partnership pension account page.

The Lump Sum Allowance (LSA) limits the amount of tax-free lump sum you can receive from your pensions at retirement.
The LSA is £268,275. This is equal to 25% of the Lifetime Allowance (LTA) in place before 6 April 2024 (£1,073,100).

The Lump Sum and Death Benefit Allowance (LSDBA) limits the amount of tax-free lump sum you can receive during your lifetime or when you die. The LSDBA is £1,073,100.

Please note: LSA/LSDBA limits may be higher if you have Lifetime Allowance protection.

For further information on the LSA please visit the scheme website.