Civil Service Pension Alpha

hugheskevi

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

Added Pension is subject to change in State Pension age, whereas the price you pay is based on your State Pension age. So if in future State Pension age increases then other things being equal EPA would be better value.

[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]

This could be due to way Added Pension and EPA interact with other scheme features. For example, if you suffered ill health you would receive either your full unreduced pension immediately or an enhanced pension immediately depending on the extent of ill health. In that scenario the EPA contributions would be worthless, whereas the Added Pension would still be of value.

Similarly in the event of early death, EPA would be worthless whereas Added Pension would have value.

[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]

That would be my conclusion too, although I can't actually see it stated anywhere that it would be a 12 month period (although that is the obvious assumption). The notes say you should be able to vary the period, but that does not appear possible.

Tom99

hugheskevi wrote: »

Similarly in the event of early death, EPA would be worthless whereas Added Pension would have value.
/QUOTE]


As you sure? I tought you got a multiple of salary if you die before retiring and effectively lose any pension contibution, be it the %age amount you have to pay, EPA or Added Pension?

hugheskevi

Similarly in the event of early death, EPA would be worthless whereas Added Pension would have value.

As you sure? I tought you got a multiple of salary if you die before retiring and effectively lose any pension contibution, be it the %age amount you have to pay, EPA or Added Pension?

It would be neutral for the lump sum death benefit, but the survivor benefits would be higher with Added Pension (assuming you bought self and dependents admittedly, there never used to be a choice about that so I had forgotten that was an option in alpha when I wrote the above) than they would be for EPA. It would be neutral if you bought self-only Added Pension.

twotonealex

Tromking wrote: »

This newly available calculator might be of use.


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

I played with this, a great tool.

Sadly, it doesn't allow you to select a retirement age of eg. 55, with payments starting from 65.

Is any lump sum taken tax free? I was struggling to work out how a lump sum could be worked as a percentage of the pension. Unless they look at the CETV and take it from there?

marlot

twotonealex wrote: »

...I was struggling to work out how a lump sum could be worked as a percentage of the pension. Unless they look at the CETV and take it from there?

I believe its commuted at 12:1

hugheskevi

Is any lump sum taken tax free? I was struggling to work out how a lump sum could be worked as a percentage of the pension. Unless they look at the CETV and take it from there?

I believe its commuted at 12:1

That's right, with a maximum commutation limit of the annual pension multipled by (30 dived by 7).

Murton

Hi, hoping someone can help.

I'm a member of the alpha scheme and contribute 5.45%. I'm confused why the pension contribution for the year is then only 2.32%. Where is the rest going? I've tried reading the literature to find the answer but not luck.

Any help much appreciated

Silvertabby

This is for the LGPS - but as that also uses a commutation factor of 12:1 it will work for the Civil Service scheme as well.

How much lump sum would you like to take?

Silvertabby

Murton wrote: »

Hi, hoping someone can help.

I'm a member of the alpha scheme and contribute 5.45%. I'm confused why the pension contribution for the year is then only 2.32%. Where is the rest going? I've tried reading the literature to find the answer but not luck.

Any help much appreciated

You are trying to compare apples with oranges !

The amount you (and your employer) pay as pension contibutions has no actual bearing on your eventual pension. They are simply the amounts needed to make the scheme affordable.

2.32% is your scheme accrual rate. ie, you are credited with 2.32% (plus revaluation) of your annual pensionable pay as a pension for the rest of your life.

This sounds like a variation of the very common question 'why am I paying £500 per year in pension contributions but only get £300 per year pension?'. And the answer is .... the £500 is a one-off payment, but the £300 annual pension is paid for life. Live for the average 20 years in retirement and you'll get back £6K (actually more as it's index linked) for your £500 payment.