Is this pension good?

David2Prit

Sorry, complete idiot when it comes to pensions. Did the pension quiz via my provider and got told I needed to look up some more information.

www. civilservicepensionscheme. org. uk /members/alpha-guide/
That's my pension.
29years old, been paying in a modest year. Got various other pensions all over the place, which I assume I should transfer into one?

Currently paying £518 (inc employer contributions) a month, which seems great.
Just been speaking with a work mate who says that they have moved to the Partnership pension as that is better.
www. civilservicepensionscheme.org . uk /members/partnership -csavc-concord/

I really, have no idea..... but obviously want the best possible pension
Only pension knowledge I have was that I was telling my missus she would be an idiot opting out of the police pension as it'll save her £130 a month... that's as far as I go.

Any advice would be brilliant!

Sorry, had to break up the links, MSE doesn't like new users adding links.....
Thank you in advance.

hugheskevi

You are in the Civil Service post-2015 career average pension scheme.

Got various other pensions all over the place, which I assume I should transfer into one?

It is likely that these other pensions are a type called Defined Contribution. With those types of pension you have a pot of money which you invest, and then draw from at retirement. The value changes in line with investment returns.

Whether it is a good idea to transfer or not depends on the amount of annual pension you are offered in your Civil Service alpha scheme in return for transferring the pension. You are exchanging a completely different type of pension, so there is no clear comparison to be made.

Having said that, transferring into a public sector Defined Benefit pension is often a sensible thing to do and will probably be a good idea in your case. You should ask your pension administrator to provide you with quotes for transferring-in each pension. Further detail of how to do this is in section 01C of the alpha scheme guide.

Currently paying £518 (inc employer contributions) a month, which seems great.

Ignore any figures about the employer contribution. The type of pension you have is a Defined Benefit, career average pension. You are not building up a pot of money, as you would with a personal pension, but rather you are building up an entitlement to an annual pension when you retire.

What matters is how much that annual pension is, how it is funded is the employer's problem. Whether the employer contributes £0 or £500 per month is irrelevant, you are still entitled to the same annual pension.

The employer contribution figure applies across the entire scheme, and includes past service deficit contributions so the figure is not a valuation of how much it costs to fund your pension accrual Hence the figure the employer claims to be contributing is not relevant to you - you can be certain you are not getting £518 per of month of pension benefits, the actual value is harder to quantify but will be much lower (using Government assumptions) when calculated for your individual position.

Just been speaking with a work mate who says that they have moved to the Partnership pension as that is better.
www. civilservicepensionscheme.org . uk /members/partnership -csavc-concord/

I think they mean 'cheaper' rather than 'better.' Partnership does not require any member contributions, unlike alpha which has member contribution rates varying depending on your salary, between 4.6% up to 7.35% for most employees.

Partnership is a Defined Contribution pension, ie, your employer puts money in, you put money in if you wish, and tax relief is added. That money is then invested and eventually you end up with a pot of money at retirement.

Whereas alpha gives you an annual pension that is guaranteed and increases in line with CPI each year, there are no such guarantees with Partnership. That isn't to say Partnership isn't a very good pension, it is, but you can accumulate Partnership-type of pensions anywhere, even outside of employment, whereas Defined Benefit pensions are very rare.

It would be best to treat alpha as the default arrangement, and only switch to Partnership if there is a compelling reason (and zero contributions are not a compelling reason).

David2Prit

Having said that, transferring into a public sector Defined Benefit pension is often a sensible thing to do and will probably be a good idea in your case. You should ask your pension administrator to provide you with quotes for transferring-in each pension.

Thank you for that, will send them an email once I locate the other pensions and relevant details of them all.

So if I understand you correctly, my last statement said that I have an annual pension of I believe £360 (Had only been paying in a few months at that point), as that grows over the years, once I come to retirement age that would be a set amount yearly I would get?
Sorry, as said complete idiot when it comes to this, if you wanna know about procedural justice then give me a shout! got a landfill of information.

Ideally I'm looking to increase my contributions within the next few years as I should be able to afford it without missing the money that much.

hugheskevi

So if I understand you correctly, my last statement said that I have an annual pension of I believe £360 (Had only been paying in a few months at that point), as that grows over the years, once I come to retirement age that would be a set amount yearly I would get?

Yes, going forward that £360 increases by CPI. Each year you work you add to the pension, and the additional pension you build up each year also increases in line with CPI.

When you retire (your normal pension age is 68, equal to your State Pension age) you add all the 'blocks' of pension together that you accrued each year to give you your total pension.

Ideally I'm looking to increase my contributions within the next few years as I should be able to afford it without missing the money that much.

You have a few choices, you should probably research Lifetime ISAs now if you haven't already as that might be particularly attractive if you haven't yet purchased a property:

(1) Added Pension - pay more in return for purchasing extra alpha pension

(2) EPA - pay more to reduce the age from which your pension is payable without reduction from. You can reduce it from 68 to either 67, 66 or 65.

(3) AVCs - basically the same as a personal pension, but via your employer and contributions deducted from payroll.

(4) Personal pension - contribute money into a pension invested in whatever you choose. Able to access it when you reach 55 (could increase in future).

(5) Lifetime ISA - accessible from age 60 or when buy first property. Get a boost from Exchequer making it similar value to higher rate tax-relief in many cases.

David2Prit

Haven't purchased a property yet, so shall have a look at Lifetime ISAs.

Thank you for your advice!

Albermarle

Worthwhile that you do some background reading .
https://www.pensionsadvisoryservice.org.uk/
https://www.moneyadviceservice.org.uk/en/categories/pensions-and-retirement
https://www.moneysavingexpert.com/pensions/

David2Prit

Thanks, shall have a look

DrSyn

I have not not looked into the civil service pension so can not say how good or bad it might be. This might be of help though:-

https://www.which.co.uk/money/pensions-and-retirement/company-pensions/public-sector-pensions-explained/civil-service-pension-scheme-explained-ahkbz9d6t82f

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

https://www.gov.uk/government/publications/public-service-pensions-increase-2018


As I understand it, pensions can be broadly be divided into:-

(a) Defined Benefit (DB): This is where the employer takes on all the investment risk, involved in ensuring the pension is going to be paid. In this case the taxpayer. I would not be surprised if this pension was increased by CPI at least (if not RPI). Both of these are IMO big pluses. This is what the civil service pension is.

DB are very expensive to fund. This seems to be the main reason why they are being ditched by employers in favour of the following.

(b) Defined contribution (DC): This is where you take on all the investment risk involved in funding the pension. My understanding is that this is normally linked to the stock market & so is much more risky than the DB type.

There will be charges in running a DC scheme that will be coming out of your pocket.

The standard advice I keep hearing on radio programs about pensions is that it is normally better to be in scheme offered by your employer. So look into it carefully before you decide what to do. I certainly did and I am glad I did.

Marcon

DrSyn wrote: »

I have not not looked into the civil service pension so can not say how good or bad it might be.

No need to do much looking to know it's a great scheme. Maybe leave it to others who are familiar with it to answer...?

DrSyn

From what I read that the one for MP's is actually gold plated as well!

LHW99

I believe some DB schemes have a time limit for how long after joining you are given to transfer other pensions in - work asking about.