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Civil Service Alpha or SIPP - which is best for me

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Civil Service Alpha or SIPP - which is best for me

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NedSNedS Forumite
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Hi all,
My goal is early retirement, I'm currently 51 and would like to retire between 56-60. I currently have a number of DB schemes from previous employment and predict a full state pension. These fixed income sources will provide me with sufficient income in retirement post SRA (67).
I currently contribute to SIPPs (with HL) for my wife (doesn't work) and myself, and these will need to fund our early retirement. We are at the point now where there is already sufficient in these pots to fund retirement at 60.
I currently work for the Civil Service and am a member of the Alpha Scheme. I'm wondering if continuing to make large SIPP contributions is the most efficient way forward for me, or if any of the options available in Alpha would be better for me (or in combination with my SIPP). Looking at the scheme, there are options to purchase an EPA to build up a further portion of DB that I could take at 65 or 66, or an AVC scheme currently provided by Legal & General.
I assume the AVC scheme (DC?) is not dissimilar to my current SIPP. Would contributions to either the EPA and/or AVC schemes both benefit from reduced NI payments if taken directly from my salary?
So given we will have sufficient fixed income on or after SRA, am I best continuing contributing to my SIPP which will give me flexibility in drawdown during my pre-SRA retirement or would having some additional DB fixed income available at age 65 be a better use of some of my current pension contributions. I guess I'm asking how good value is purchasing an EPA through Alpha compared to a SIPP?
Happy to provide more detail as required.
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  • Tom99Tom99 Forumite
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    I don't think adding to your Civil Service pension saves you any NI, but happy to be proved wrong.
    As well as EPA which just brings forward your pension by up to 3yrs you can also contribute to Added Pension ie a fixed payment now will give you a fixed additional amount (index linked from now) at SRA.
    I find Added Pension easier to understand then EPA. You can always bring the date payable forward by accepting a slightly lower amount, about 5% less for each year.
    Mathematically EPA and Added Pension should be equal.
    Your SIPP gives you the advantage of much more flexibility in how and when you take the payments.
    Using the Added Pension calculators you can probably work out the growth rate you SIPP would need to achieve to match.
  • edited 14 August 2019 at 8:09AM
    BravepantsBravepants Forumite
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    edited 14 August 2019 at 8:09AM
    If you buy Added Pension you are buying a guarenteed income that will increase with inflation. I assume you will put your SIPP into drawdown and you will use the oft touted standard withdrawal rate of 4% per annum (but maybe 3% would be better), keeping the fund invested in something like a 60%/40% equity/bond fund.



    So your choices are:



    1. Pay the money into a SIPP and draw the SIPP down at, say 3%, hoping the fund lasts 30 years.



    2. Pay the same money into Alpha, and even if you draw the pension from 55 and become subject to the 0.543 actuarial reduction from Normal Retirement Age (67?), the amont of pension you will get is STILL quite close to the equivalent 4% drawdown rate, BUT the fund is not subject to the whims and fancies of the stock market, and will be index linked for life.



    I pay Added Pension, with the intention of taking from 55. I also have an S&S ISA, and a SIPP held as cash (as my bridge from 55 to 60 whereupon my Premium Pension will kick into payment).



    It depends on your overall retirement strategy really. If Alpha is your only CS pension you may want to delay taking it and build a bridge using your SIPP. However, I would definitely contribute to Alpha Added Pension over an AVC or EPA.


    Edit: Ah I just re-read that you have enough in your SIPP to get you to 60, then in your shoes I would contribute more to Added Pension rather than SIPP. Once I've got my SIPP bridge sorted, I will paymore into Added Pension, buying "self and dependent's" pension.
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  • DoxDox Forumite
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    Tom99 wrote: »
    I don't think adding to your Civil Service pension saves you any NI, but happy to be proved wrong.

    There is only an NI saving where pension contributions are made by salary sacrifice.
  • FrogstarFrogstar Forumite
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    Would a 3rd option be to consider moving from Alpha to the Partnership pension?

    Of course Alpha is better normally, but if you are completely satisfied with your DB/state amounts already, then I imagine Partnership would outperform SIPP by the employer contribution (up to 14.75% of your pensionable salary plus up to another 3% in matching your contributions).

    Could have lower contributions than Alpha to free up more for the SIPP too.

    As it is defined contribution, it is available from the same age as a SIPP. Probably not worth as much in total over a lifetime, but brings the money forward by 10 years like a SIPP does.

    Just a suggestion based on my understanding.
  • NedSNedS Forumite
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    Thank you, I'm not familiar with the Partnership pension? Could I have that for additional contributions and keep my DB Alpha? When I said I'm happy with my fixed income from DB/State pension, this includes the income I will have from Alpha so I don't want to give that up in exchange for more DC.
  • BoGoFBoGoF Forumite
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    No you need to choose betwern partnership and alpha.
  • hugheskevihugheskevi Forumite
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    I'm not familiar with the Partnership pension? Could I have that for additional contributions and keep my DB Alpha?
    Although you cannot have both Partnership and Alpha, you can have Alpha and an AVC account. The AVC account has the same investment options and charges as Partnership.
  • FrogstarFrogstar Forumite
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    Although, as far as im aware, if you retained alpha and had an avc account your employer would not make or match any contributions to the avc.

    So to my mind there would be a lot less to distinguish it from the SIPP you already have. You would have to specifically compare the charges and investment options to consider if it is a better option than your SIPP. I dont know how those compare.

    I'm just speculating based on what seems sensible, but if you transferred to partnership I imagine you would be able to keep your existing alpha benefits as they are and they would just increase with inflation.

    But if you need the future alpha contributions you have yet to accrue but will have done by the time you retire, then yes as you say switching to partnership wouldn't be great because you wouldn't accrue any new further benefit in alpha.
  • NedSNedS Forumite
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    Am I correct in assuming my employer isn't going to match or contribute anything further, so this basically comes down to contributing to my SIPP with the flexibility that brings, and/or contributing more into Alpha (either by way of added pension or EPA) which benefits from being DB with inflation increases.


    As I don't need the extra DB fixed income post 67 I think I'll stick with my SIPP contributions as I'm yet to see any real benefit in contributing more to Alpha, whereas at least with SIPP contributions I can access the money from 55 and can pass on in full anything that's left when I die.
  • ThrugelmirThrugelmir Forumite
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    With only a few years to your intended retirement date. Security of buying added pension may be more beneficial than the vagarities of global markets.
    “Far from seamlessly assimilating new ideas into our existing belief framework, research shows that we actually tend to get more firm in our cherished beliefs when those beliefs become challenged.”
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