Banked classic pension and link to final pension in Alpha

jamessanderson

Hoping someone can explain this to me!


I am a civil servant with 24yrs service (classic member) and my last pension statement 2014 says I have accumulated a pension worth £15,500 (to date)


I am trying to understand the preserved link to final salary


For example: If I left service now before going into Alpha I presume that at NPA for Classic I can draw the £15,500 at 60 (with increases for what its worth ten)


My Annual salary in the last 3 years has been higher during Classic than it will be under Alpha (initially) due to change of job. Is there an impact due to this?


Is my £15,000 really banked and safe and how is the average salary of alpha linked to my classic accruals and final pension amount?


How does Alpha affect my the amount above if say I retire at 60 (normal NPA for classic and reduced for early retirement from Alpha)


Maybe I am being stupid but I just don't get the connection.
Can anyone explain this to me with an example

sammyjammy

jamessanderson wrote: »

Hoping someone can explain this to me!


I am a civil servant with 24yrs service (classic member) and my last pension statement 2014 says I have accumulated a pension worth £15,500 (to date)


I am trying to understand the preserved link to final salary


For example: If I left service now before going into Alpha I presume that at NPA for Classic I can draw the £15,500 at 60 (with increases for what its worth ten) Yes


My Annual salary in the last 3 years has been higher during Classic than it will be under Alpha (initially) due to change of job. Is there an impact due to this? No the average salary under Alpha will only use your salary once it starts in April 2015.


Is my £15,000 really banked and safe and how is the average salary of alpha linked to my classic accruals and final pension amount? Yes its safe but it won't be £15k thats just what it is now. Although the Classic pension ends in April it will still be calculated on what your salary will be when you actually retire not what it is now. So based on 24 yrs service up to April 2015 it'll be ave salary at retirement age/80*24


How does Alpha affect my the amount above if say I retire at 60 (normal NPA for classic and reduced for early retirement from Alpha) Not sure what you mean by this it wouldn't be affected at all


Maybe I am being stupid but I just don't get the connection.
Can anyone explain this to me with an example There is no connection, you need to start looking at them as totally separate and not dependant on each other

It is a little complicated, no expert but I've tried to answer your questions.

hugheskevi

My Annual salary in the last 3 years has been higher during Classic than it will be under Alpha (initially) due to change of job. Is there an impact due to this?

It is not relevant to the change of pension, but you may find that your classic pension reduces as your final pensionable salary reduces.

Classic uses the last three years to look for highest pensionable salary. If your highest year of full-time equivalent pensionable pay happened to be from 3 years ago and your salary remains lower than that, then the salary used to calculate classic entitlement falls. Usually the impact of this would be more than offset by an extra year of accrual, but once you are no longer accruing benefit it would simply appear as a lower pension.

jamessanderson

"Is my £15,000 really banked and safe and how is the average salary of alpha linked to my classic accruals and final pension amount? Yes its safe but it won't be £15k thats just what it is now. Although the Classic pension ends in April it will still be calculated on what your salary will be when you actually retire not what it is now. So based on 24 yrs service up to April 2015 it'll be ave salary at retirement age/80*24"


Still a bit confused so let me give a scenario:

Most recent salary on secondment has salary of say £50,000 and this has resulted in a banked classic pension of £15,500 for that salary and 24 years service/contributions aged 45yrs. Then new salary under Alpha is say £25,000 . THEN person leaves service in 4 years time on say salary of £27,000. What effect does this have on calculation of Classic and or final pension?

Thanks and forgive me if I am being thick!

p00hsticks

jamessanderson wrote: »

Still a bit confused so let me give a scenario:

Most recent salary on secondment has salary of say £50,000 and this has resulted in a banked classic pension of £15,500 for that salary and 24 years service/contributions aged 45yrs. Then new salary under Alpha is say £25,000 . THEN person leaves service in 4 years time on say salary of £27,000. What effect does this have on calculation of Classic and or final pension?

Thanks and forgive me if I am being thick!

Classic is a FINAL salary scheme, so it's based on your salary (close to) when you leave / at retirement age. If your salary drops more than three years before then, your pension will too. As hugheskevi says, you can calculate it as final salary (or more accurately, highest pensionable earnings over the last three years) x years service / 80.

So you'll have the 24 years service banked, but your final salary is still to be determined - in the scenario you quote it will be £27,000, so your pension would be £27,000 x 24 / 80 = £8,100.

Alpha is an AVERAGE salary scheme, so in the scenario you quote you'll accumulate a percentage of your salary , whatever that may be from £25k to £27k over each of the next four years until you leave.

hyubh

jamessanderson wrote: »

Still a bit confused so let me give a scenario:

Most recent salary on secondment has salary of say £50,000 and this has resulted in a banked classic pension of £15,500 for that salary and 24 years service/contributions aged 45yrs. Then new salary under Alpha is say £25,000 . THEN person leaves service in 4 years time on say salary of £27,000. What effect does this have on calculation of Classic and or final pension?

You can help yourself by not using the word 'banked'. As others have said, given the final salary link is retained the value of your Classic scheme membership is only determined when you actually leave, regardless of the fact you won't accrue any more Classic scheme reckonable service once in Alpha. Also keep in mind the 'salary' used is whole time equivalent - were a 50K to 25K drop real I would expect it to be due the employee going part time rather than their rate of pay dropping so severely.

philip1988

If the OP actually had such a drastic drop in salary as in his example, would he be better off not joining the Alpha scheme thus preserving his final salary of 50K (and higher pension) and puting his pension contributions into a private pension instead?

jamessanderson

So when they say that your classic contributions are "banked" at 31/03/2015 all it means is that your years of service are banked.


I thought that as the whole final pension scheme was ending that any final projection was also banked at that point and the new average assessment only applied to the years in Alpha?


I suppose this would not matter to most people whose salaries do not change downwards. It is therefore not the protection I thought it was, as presumably somebody who moves into a lower paid job for the last 3 years of employment have ALL their annual salaries assessed on the last 3 years of Alpha for both classic and alpha contributions/pension which means that the higher earnings they achieved in classic (with the projected pension) are not banked due to the retained link to final salary.


Have I got it now?

hugheskevi

If the OP actually had such a drastic drop in salary as in his example, would he be better off not joining the Alpha scheme thus preserving his final salary of 50K (and higher pension) and puting his pension contributions into a private pension instead?

Yes, although not really the bit about private pension.

The member would almost certainly be best leaving alpha as that would be the only way to preserve the final salary in classic. Whilst the member is an active member of alpha they automatically retain the classic final salary link.

In such an unlikely scenario of a big FTE pay cut, opting to leave alpha and move into Partnership is likely to be the best course of action.

Have I got it now?

Yes.

jamessanderson

hugheskevi wrote: »

Yes, although not really the bit about private pension.

The member would almost certainly be best leaving alpha as that would be the only way to preserve the final salary in classic. Whilst the member is an active member of alpha they automatically retain the classic final salary link.

In such an unlikely scenario of a big FTE pay cut, opting to leave alpha and move into Partnership is likely to be the best course of action.

Thanks very much I get it now

Yes.

Thanks very much - I get it now

penwise

I have a salary of 30000 and 19 years service.

I reach 60 in 2023

Can you leave Alpha even if still working for civil service? And at point you leave Alpha is that final salary used.?


Thanks