CSPS Alpha

tintin00

Hi Folks,

I am on the verge of taking my first job with the Civil Service and have been looking through the literature for the Alpha pension scheme. I am 36 and have for the last 10-15 years been paying into DC pension schemes and my SIPP which is now a healthy balance.

The Alpha pension scheme looks on the face a very very attractive scheme. From someone who has spent many evenings in front of my PC with pension projection and experimenting with Safe Withdrawal Rate modelling, to have a scheme that is guaranteed a healthy regular payout in line with CPI seems almost two good to be true.

Is there anything that I many be missing or any drawbacks of this scheme (other than the inflexibility in relation to a SIPP)?

One area where I am a bit confused is taking your income early. Am I right in saying that the early retirement factor is applied to the amount of benefit that you have built up, rather than the amount you would have built up should you remain employed.

So for example if I am aged 37, earn £10,000 and work for 20 years the total income built up would be £10,000 x 2.32% x 20 = 4,640

Now if I take early retirement would the early retirement factor which is 0.562 apply to that £4,640? Or would it be worked out by what my total would be if I had worked for 30 years? Pretty sure its the first scenario, just want ed to make sure as the Instruction sheet on that factor spreadsheet is very confusing

I am keen to take this post, but have had my mind set on early retirement for a long time so would want this scheme to help me towards that goal.

Thanks for any help

Bravepants

The reduction is applied to the pension you have accrued. You only accrue at 2.32% per year, per year you work.

Bravepants

Also remember your partner's pension (if you have a nominated partner) would also be reduced by the same amount. Partner's pension is 0.38 of pension, so it would end up being 0.38*0.562 = 0.21 of pension accrued - worth thinking about.

OldBeanz

You should also arrange a quote for transferring your pensions into the scheme. It may or may not be to your advantage but if you need help deciding then come back here.

tintin00

That is excellent. Thanks very much folks for your help.

Just out of interest, what kind of transfer in value could I be expecting. My SIPP is £180k.

hugheskevi

Just out of interest, what kind of transfer in value could I be expecting. My SIPP is £180k.

The actuarial factors are published at this link.

I make it about £23,500 p/a

jamesperrett

One other thought...

Having both types of pension could be useful if you want to retire early. It may be worth deferring the Alpha pension and living on your DC pension for the first few years of retirement.

Bravepants

Also, buying Added Pension is quite a good option, you can do that monthly or by lump-sum.

There are those that say that buying added pension is pointless if you are going to actuarially reduce it. BUT consider that even at 0.56 reduction the return is still better than the 4% rule for DC drawdown. This may also depend on how soon you buy AP as it tends to get more expensive the closer you get to NRA.


(I'm considering going at 55, with a 0.543 reduction, but then I also have 19 years or so in deferred Premium, which I will take unreduced at 60).

AnotherJoe

As hinted to above an alternative strategy is rather than take Alpha early, take it at the scheme date and burn through your SIPPs and other pensions at a faster rate to fill the gap.
This is something you can of course decide much closer to your actual retirement date.