CS alpha - added pension vs EPA

sarah69696pink

I’m mid 30s and am afraid to say other than having a pension since I started working I have been largely ignorant to retirement planning. I am currently on the civil service alpha scheme.
Trying to think ahead and am looking at buying added pension and doing EPA. However I’m a bit confused as to which I should do first, or if I’m best just starting both.
I understand I can’t buy epa if I’ve bought the maximum added pension, but other than that I’m a bit confused!
I’ve read the guides in the civil service pension website and it doesn’t really help me out. I know I want to increase my pension and have the option of lump sum payments (added pension) and I’d like to retire early (epa). So do I basically just need to start doing both ASAP?
Can anyone direct me to any other websites that may help or offer any words of wisdom?

JoeCrystal

That is a tricky one to consider, but I can certainly try to offer some words of wisdom.

Ideally, you would need to calculate the benefits against the costs of doing both or either. You have to bear in mind after reading the various guides on the civilservicepensionscheme website this morning that you are building up EPA at the same rate so if you have, let say five years already. It will only affect future years accrued since. What you are getting with EPA is to get a part of your pension paid out unreduced whatever the years it is before SPA. While I am confident that your current SPA is 68, it is uncertain at what age it would be changed to in three decades times. The cost of buying the EPA for the year will adjust every year as well.

You can download the spreadsheet and see how much it would cost to get it. But you might find it cheaper if you want to retire a few years earlier to save or invest separately into another pension scheme. Let's say you want £10,000 per year to cover the gap between when you retire and when you want to access your pension, then you can plan.

As for Added Pension, it can be worth doing, but you need to look into the cost of it and the fact it will get reduced should you access it before SPA. While everyone's set of circumstances is different, I would not hesitate to buy the Added Pension scheme if it is worthwhile.

pathsofdarkness

I don't really have any advice but I can tell you what I'm doing in case it's useful.

I joined the Civil Service Alpha pension scheme in 2015 at the age of 35 as an EO grade on £31k. I'm now a HEO grade on £40k (thanks to the Employee Deal but still £2k under the max of the specialist pay-scale).

In 2015 I also took out a nine year contract to buy £6,500 of Alpha Added Pension (the maximum at the time) over a nine year period at a fixed cost of £443.37 per month based on what the official calculator told me. Given that I'm not increasing my payment by inflation, I do wonder if I'll end up with less Added Pension that I thought I was buying but so far it looks okay on track to me.

My plan in year 10 is to buy the remaining maximum amount of Alpha Added Pension minus £1. Then from year 11 onwards I'll switch over to EPA-3 so that whatever pension I build up from there onwards can be taken at age 65 instead of 68. I'll then wait until 68 for the rest of my standard Alpha pension and Alpha Added Pension to kick in.

Whilst writing out the above I suppose I could delay taking my EPA-3 until age 68 so that I benefit from the increase deferment brings but not sure how that would work (or if that's even allowed given I will already have the maximum added pension). This paragraph is just a stray thought which just occured to me but something perhaps worth thinking about.

Below is a table showing how much Alpha pension I have accumulated to date (cumulative totals):

Year_________Alpha (main)__Alpha (added)___Total
2015-2016____£743________ £862__________£1,605
2016-2017____£1,583_______£1,721________£3,304
2017-2018____£2,528_______£2,614________£5,142
2018-2019____£3,512_______£3,493________£7,005

My understanding is that you can't do both Added Pension and EPA in the same scheme year, you can only do one in any given year e.g. you could alternate between them each scheme year if you wanted to. On this forum I've read that EPA and Added Pension are mathematically equivalent but I've never understood why.

JoeCrystal

pathsofdarkness wrote: »

In 2015 I also took out a nine year contract to buy £6,500 of Alpha Added Pension (the maximum at the time) over a nine year period at a fixed cost of £443.37 per month. However I think it'll end up buying less because this fixed payment doesn't increase with inflation or salary increases hence probably resulting in less Added Pension than I thought I was buying but oh well nevermind.

That's interesting! I was under the impression that £6,500 of the Added Pension bought in 2015 got revalued by inflation on an annual basis right? So if you purchased £722 for that year, it would be worth £806 by now or have I got the wrong end of the stick?

Either way, it is pretty neat to get £6,500 per year by paying £47,883.96 over nine years before taxes. :cool: It should pay itself back in seven years after your NPA or so.

*Make a note to see if there are job opportunities in the Civil Service in the future!*

pathsofdarkness

I was under the impression that £6,500 of the Added Pension bought in 2015 got revalued by inflation on an annual basis right? So if you purchased £722 for that year, it would be worth £806 by now or have I got the wrong end of the stick?

No, you are correct, that £6,500 gets revalued by inflation on an annual basis. If I bought £722 of added pension then it would get uprated with inflation each year.

What I'm getting at in my original post is my fixed cost of £443 p/m. There was originally an option on the application form which said do I wan't to pay a fixed cost or a percentage of my salary to buy the added pension and then some warning about how choosing a fixed cost of £443 p/m in 2015 would buy less added pension each successive year. I didn't pay any attention to that but so far it looks like I'm on track. I'm not an expert on this so be aware I could be wrong, this is just to the best of my understanding

sarah69696pink

Thank you all so much for taking the time out to help!
Need to do some calculations and a bit more reading to make a decision I think.

berbatov10

So I am in the Alpha scheme, I have a 30 year pension from elsewhere and am aged 59. Is it worth buying extra pension either by lump sum or monthly contributions