Clueless on Pensions - Civil Service Alpha or Partnership?

hugheskevi

I have a civil service classic pension which stopped as of June 18. I was automatically transferred onto Alpha from this date due to new pension rules and my age (55 in Feb)

To be more precise, you ceased to accrue further service in classic but the link to your final salary continues.

I probably plan to retire at 60. I’m undecided as to whether I should stay in with Alpha for approx 5 years or move over to the partnership scheme and invest the contributions? .

Alpha should be comfortably better. The Partnership rates are calculated actuarially to reflect the value of alpha, but the same rate applies for all over 46, ie, those above 46 are expected to get less from Partnership than from alpha.

the Government is currently on the wrong end of an appeal court decision in which people like you and I who have been moved from the PCSPS Classic scheme onto the less generous Alpha scheme may have been discriminated against on the grounds of our age.

The accrual rate in alpha is so good (reflecting the low revaluation rate of CPI, whereas several other public service schemes have higher revaluation rates such as CPI+1.5%) that alpha may well be better for older employees (broadly those over about 50) than classic, premium or classic plus.

It may be the case that I wish to retire before 65, in which case, how would I go about selecting which option to choose now?

EPA and Added Pension end up being very similar in most cases, as they share the same actuarial assumptions. So choosing between EPA and Added Pension isn't going to make much difference financially, assuming you contribute the same to either option.

You might also wish to build up Defined Contribution or LISA savings to eliminate or reduce the actuarial reduction.

jamesperrett

hugheskevi wrote: »

You might also wish to build up Defined Contribution or LISA savings to eliminate or reduce the actuarial reduction.

This was one thing that I wish I had done before taking early retirement - even just building up a years worth of pension in a DC pension would give you a reasonable increase in your civil service pension.

tonycottee

I switched from the Classic to Alpha several years back now. Although it's not as generous, it's certainly a worthwhile scheme. I recommend strongly that people look at EPA. I have increased my contributions by 3.6% of my salary, but means that I will be able to retire 3 years earlier. There's some more information about buying extra for an Alpha pension.

sammyjammy

CEliz said:

JoeCrystal wrote: »

If you want to aim for £19,259 by 68 with 41 years of contribution and assuming that Civil Service contribute 8%, then you will need to contribute £1653.42 or 98% of your salary per month personally. (It does results in £1,050,000 pension pot but it assume you want to buy an index-linked annuity)

Is this what most people are facing with standard pensions across the UK? Now I understand why the Civil Service is so excellent for pensions. The fact I am able to still be receiving £19+ per year when I retire means I am almost 100% sure I am never leaving!!
I imagine this means I will be earning more in retirement than my partner also.

Also known as golden handcuffs, says the Civil Servant with 30 years service.

thespaniel1

So I'm about to don the golden handcuffs and deciding between alpha and partnership. I'm 30, I'll be on £65k and I intend to save aggressively now whilst I can to give myself as many options as possible as young as possible. 
Here's my question - the employer contributions currently are 7.35% employer, 27.9% employee for my bracket - which is insane. But how does that relate to the 2.32% return on the total pension?
My current understanding is that I'll contribute £4.78k per year (7.35%*£65k), the CS contributes £18.16k, so every year (ignoring inflation) my pension is getting £23k (£4.78k+£18.16k) per year extra. Assuming salary stays the same, and let's say I work 38 years in the CS until retirement, do I get a yearly payment of 2.32% of the total pot, so:
£23k*38 = £874k
£874k*2.32% = £20.3k per year every year until my spectacular death?

that feels low, what am I missing? 

thespaniel1

I'm referring to Alpha in my comment btw

Dazed_and_C0nfused

There is no "pot".  

And you can really ignore the employer contribution as that has no impact on you.

You have missed the whole point of a DB pension.  It is a promise to pay £x for your lifetime (from your State Pension age).

So you contribute £4777.50* in a year and in return the Alpha pension will pay you £1,508 back.  Each year.  For the rest of your life.

* probably only a net cost £2,866 after the tax relief gained by your taxable pay only being £60,223 not £65,000

thespaniel1

ok my above post calculates it wrong, I think it should be like this:
2.32%*65k = £1508. So assuming no inflation and no pay rises/reductions, do I get yearly payments of £1508*(number of years service) ? So if I'm enrolled for 10 years, I get yearly pension of £15,080 when I reach pension age?

thespaniel1

final question - if that's the case is the employer contribution of 27.9% just what it takes to fund a yearly payment of 2.32% in perpetuity? 

JoeCrystal

Yes, that is pretty much is. You are right, it is insanely cheap and you will recoup all your contribution in a few years once you get your pension and the rest is free money for the rest of your life.