Alpha or Partnership

Fretters1405

Hi, wonder if anyone can assist with some pension advice. I have recently retired having completed 30 years in the police service and I am in receipt of my pension. I am 49 years of age and have now started work for the Civil Service and need to decide if the Alpha or Partnership pension is the better option for me. I want to fully retire at 55 so will have approx 5 years to make contributions. Any views welcome please.

marlot

If you search on here, this question has been asked a few times.


As someone who joined the civil service at 49 and retired at 55, alpha worked well for me, even after the actuarial reduction.

Brynsam

Defined benefit v defined contribution - bit of a no brainer!

hyubh

Brynsam wrote: »

Defined benefit v defined contribution - bit of a no brainer!

The original poster already has a 2/3 final salary pension. And Partnership is excellent as DC schemes go - for a 49 y/o, employer contribution of 14.75% standard + 3% matching.

Brynsam

hyubh wrote: »

The original poster already has a 2/3 final salary pension. And Partnership is excellent as DC schemes go - for a 49 y/o, employer contribution of 14.75% standard + 3% matching.

OP wants to 'fully retire' at 55, so it sounds as if maximising pension provision, rather than flexibility, is the priority.

As you say, Partnership is excellent as DC arrangements go - but don't forget years of DB pension are worth 'more' the older you are (and having a 2/3 final salary pension already doesn't alter that) - probably considerably more than the Partnership 17.75%.

hugheskevi

As you say, Partnership is excellent as DC arrangements go - but don't forget years of DB pension are worth 'more' the older you are (and having a 2/3 final salary pension already doesn't alter that) - probably considerably more than the Partnership 17.75%.

Looking at the alpha CETV factors, alpha is valued at 25% of salary for a 49 year old, of which the member would be contributing 5.45% (depending on salary, 5.45% is the main contribution band), so about 20% employer contribution value.

Using CETV is a slight underestimate, as active pension is worth more than the deferred basis CETV is based on, due to things such as in-service ill-health benefits, death-in-service lump sums, etc.

CETV might also be a bit low (or high) depending on your views about the SCAPE discount rate used in the calculations, and whether it is too high or too low.

OldBeanz

It is not going to make any significant difference to you so toss a coin then forget about it

hyubh

Brynsam wrote: »

OP wants to 'fully retire' at 55, so it sounds as if maximising pension provision, rather than flexibility, is the priority.

He's got a 30 year, old-style police pension in payment, and a state pension to come later which (given he's still working currently and so earning nSP credits) will be materially higher than would have been anticipated even a decade ago. Partnership should be seriously considered.

As you say, Partnership is excellent as DC arrangements go - but don't forget years of DB pension are worth 'more' the older you are

Indeed, hence Partnership's employer contributions are tiered by age (the OP is in the top tier).

JoeCrystal

OldBeanz wrote: »

It is not going to make any significant difference to you so toss a coin then forget about it

Well, I think it is essential to calculate at least which deal is better. Assuming Fretters1405 is on £24,000 salary.

Alpha

Assuming that the pay rise and revaluation are the same over the next five year, Fretters1405 will build up a pension of £2,790 at the SPA of 67 although it will be actuarially reduced at 55. It would cost him £6,540 over the five years so it wouldn't take too long to get the money back even at the reduced pension. One would need to contribute 27% of the salary for 18 years to get a similar annuity from scratch.

Partnership

The employer does match the employee's contribution above the age-related contribution so employee pay in 5% while the employer pay in 17.75% which worked out as the total contribution of £27,300 over five years.

Hmm, I know which one I would instead take!

Marcon

hyubh wrote: »

Indeed, hence Partnership's employer contributions are tiered by age (the OP is in the top tier).

Still doesn't come close to Alpha...

Kynthia

Alpha is generally considered better when purely comparing the two financially but your needs and goals should also be considered. As you already have a significant DB pension and will get the state pension, you already have guaranteed regular income for lifebut is it sufficient or do you need more to live on? Do you have savings for the years you need more than what these pensions pay such as double glazing, house renovations, paying for a child's wedding, trip of a lifetime, etc? Partnersip can be used if you're looking for a pension you can use to fund the gap between retirement and state pension age, to have more money when you're younger and your health is better or for large one-off expenses. Alpha is better for long-term guaranteed income.