Civil Service Pension Alpha

santos565

I am about to start my new job. My salary is £31,000 if I contribute the default amount (based on that salary for the next 16 years - i know it may go up but stick to that figure) how much yearly pension will I get after 16 years? (im 49 now I would like to retire at 65 not the 68 that alpha is.) and without asking for a lump sum.

Also I have MOD Pension that is worth, at the moment, £4500 PA (plus a lump sum of approx £20,000 at the age of 60 (I have to draw this one at 60 - no deferral allowed)

I also have a railway pension worth £4000 at the age of 60 (plus lump sum of 16,000) But I can defer this one and it will increase if deferred

Would it benefit to transfer these over to Alpha? or should I leave them alone.

letspretendforaminute

Personally, I'd leave the other two pensions alone as they come with better protections and expect a similar defined benefit pension to accrue whilst in your third career. In today's money ~£1000 a month plus state pension.

marlot

This is easy to work out.

Alpha pays 2.32% a year of your salary for each year you work. So in your case, 16 * 2.32% of £31,000 = £11,507. And its linked to CPI, so even if you don't get a pay rise, your pension will be rising each year.

As you've noted though, it pays out at 68. If you want it to retire at 65, you have a few choices. You can pay extra to have alpha pay out 3 years early. Or you can take an acturial reduction and have it start at 65, or you can fund 65-68 using a SIPP or other savings.

Tayloriw1

You can take Alpha pension at 55 if you want too

twotonealex

Tayloriw1 wrote: »

You can take Alpha pension at 55 if you want too

Suffering actuarial reduction of approx 5% a year (this is approx. figure from CSP contact I had recently).

Based on the state pension age of 68 (I don't know if this applies to the OP), if you took your Alpha Pension at 55 instead of NPA at 5% reduction per year (forgetting CPI increase), you would only be contributing for 6 years (age 49-55).

This would give you a pre-CPI adjusted annual amount of £4315.
For arguments sake, if you reduced this from 68-55, then the amount left would be £1510 PA, not good!

As Marlot mentioned, you can indeed pay to reduce your retirement age by up to 3 years. This is referred to as EPA and is a good option if you wanted to retire at 65 instead of 68. Note that if the NPA increased by a year, then the max 3 year reduction of EPA would naturally reduce the Alpha Pension age to 66, rather than 65.

In this case, it would make most sense to leave the other pensions as already stated, pay EPA to reduce Alpha age by 3 years, and have some savings to bridge the gap between your required retirement income and what your 2 other pensions provide should the NPA increase by another year (pushing back your Alpha drawing age).

Hope that makes sense!

hugheskevi

Suffering actuarial reduction of approx 5% a year (this is approx. figure from CSP contact I had recently).

Based on the state pension age of 68 (I don't know if this applies to the OP), if you took your Alpha Pension at 55 instead of NPA at 5% reduction per year (forgetting CPI increase), you would only be contributing for 6 years (age 49-55).

The reduction factors are published at https://www.civilservicepensionscheme.org.uk/members/actuarial-factors/.

A Normail Pension Age 68 alpha pension commenced at age 55 would be reduced by 48.7%.

The OP's State Pension age will be 67. An alpha pension with Normal Pension age of 67 commenced at age 55 would be reduced by 45.7%.

Tom99

twotonealex wrote: »

As Marlot mentioned, you can indeed pay to reduce your retirement age by up to 3 years. This is referred to as EPA and is a good option if you wanted to retire at 65 instead of 68. Note that if the NPA increased by a year, then the max 3 year reduction of EPA would naturally reduce the Alpha Pension age to 66, rather than 65.

[FONT=Verdana, sans-serif]I don't get why EPA is a good option if you want to retire 3 years early.[/FONT]
[FONT=Verdana, sans-serif]The cost works out the same as buying added pension at your retirement age then using the actuarial reduction of about 5% pa to bring it forward by 3 yrs.[/FONT]
[FONT=Verdana, sans-serif]EPA seems just to complicate the already available option as its only the years you have paid EPA which are brought forward. You end up with a mix and match with some pension payable earlier than others.[/FONT]
[FONT=Verdana, sans-serif]Also who is to say when you get nearer pension age you will want to take it exactly 3 year early, you may change you mind and go for say 5 years or 2 years early.[/FONT]

hugheskevi

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[FONT=Verdana, sans-serif]I don't get why EPA is a good option if you want to retire 3 years early.[/FONT]

[/FONT]

[FONT=Verdana, sans-serif] [FONT=Verdana, sans-serif]The cost works out the same as buying added pension at your retirement age then using the actuarial reduction of about 5% pa to bring it forward by 3 yrs.[/FONT][/FONT]

[FONT=Verdana, sans-serif]If all the actuarial assumptions are accurate, then the use of EPA or Added Pension would result in the same outcome.[/FONT]

[FONT=Verdana, sans-serif]However, EPA has zero pension input whereas Added Pension gives a pension input, so for those who are currently or may in future be affected by Annual Allowance issues, EPA would be more attractive.[/FONT]
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[FONT=Verdana, sans-serif][FONT=Verdana, sans-serif]Also who is to say when you get nearer pension age you will want to take it exactly 3 year early, you may change you mind and go for say 5 years or 2 years early.[/FONT] [/FONT]

As alpha is both actuarially reduced for early payment and actuarially enhanced for late payment, with each year being calculated separately and then summed to give total pension, it wouldn't matter when you drew the pension (assuming you think the actuarial assumptions are reasonable).

Tromking

This newly available calculator might be of use.


https://www.civilservicepensionscheme.org.uk/members/modeller/

twotonealex

hugheskevi wrote: »

[FONT=Verdana, sans-serif][/FONT][FONT=Verdana, sans-serif]If all the actuarial assumptions are accurate, then the use of EPA or Added Pension would result in the same outcome.[/FONT]

[FONT=Verdana, sans-serif]However, EPA has zero pension input whereas Added Pension gives a pension input, so for those who are currently or may in future be affected by Annual Allowance issues, EPA would be more attractive.[/FONT]
[FONT=Verdana, sans-serif]
[/FONT]As alpha is both actuarially reduced for early payment and actuarially enhanced for late payment, with each year being calculated separately and then summed to give total pension, it wouldn't matter when you drew the pension (assuming you think the actuarial assumptions are reasonable).

Thanks for this insight.

Forgetting the annual allowance, is there a better option out of the two?

I have requested to pay for the EPA - 3 years option as of next April.

I am working from now (27) until 55. I will have 28 years of 'contributions', and earn £34K, this is expected to increase to £45K in the next 4 years. I understand how the Alpha DB scheme works in terms of pensionable income based on these figures.

Thanks!

Tom99

twotonealex wrote: »

Thanks for this insight.
Forgetting the annual allowance, is there a better option out of the two?
I have requested to pay for the EPA - 3 years option as of next April.
I am working from now (27) until 55. I will have 28 years of 'contributions', and earn £34K, this is expected to increase to £45K in the next 4 years. I understand how the Alpha DB scheme works in terms of pensionable income based on these figures.
Thanks!

[FONT=Verdana, sans-serif]Then according to the online calculator if male age 27 you will pay 2% EPA this year.[/FONT]
[FONT=Verdana, sans-serif]So 2% x £34,000 = £680 gross EPA contribution this year.[/FONT]
[FONT=Verdana, sans-serif]For that you will bring forward this years pension by 3 yrs from 2059 to 2056[/FONT]
[FONT=Verdana, sans-serif]ie £34,000 x 2.32% = £788.80pa payable for 3 yrs from 2056 but the amount index linked from now.
[/FONT]
[FONT=Verdana, sans-serif]The alternative Added Pension option would buy additional pension payable from age 68 in 2059.[/FONT]
[FONT=Verdana, sans-serif]To equate the above EPA with Added Pension you would have to buy Added Pension of:[/FONT]
[FONT=Verdana, sans-serif]
[/FONT][FONT=Verdana, sans-serif]£788.80/0.842 (0.842 is the pension reduction factor from age 68 to 65)= £936.82-£788.80= £148.02pa[/FONT]
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[/FONT][FONT=Verdana, sans-serif]Using the Added Pension Calculator the one off cost of buying £148.02pa from age 68 for a 27 yr old is = £812.63 but if you pay by 12 monthly instalments its £61.06x12=£732.72.[/FONT]
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[/FONT][FONT=Verdana, sans-serif](NB there must be an error in the calculator as paying 12x Mths can't be 10% cheaper than a lump sum now?)[/FONT]

[FONT=Verdana, sans-serif]So if you believe the online calculators, at age 27, EPA is slightly cheaper at £680 this year compared with Added Pension at £812.63/£732.72. [/FONT]