Invest more into a works pension or save?

I know this may seem a 'no-brainer' but thought I'd check with the experts here. My wife is hoping to retire in 8 years time and has had no works pension until last year when she joined the Civil Service Partnership Pension, a Def Contribution scheme with L&G being the provider.  The pension pot is increasing nicely as CS contribute 14.75% of salary plus matches upto 3% of my wifes 5% contribution. We have £400pm now available each month as just paid mortgage off....I think we should be adding this to the pension pot rather than saving, ISAs, as the return on investment is far greater on the Pension. Hopefully a simple answer please -- and that it is Yes - put it into the pension! Thanks all

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  • Dazed_and_C0nfusedDazed_and_C0nfused Forumite
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    Have you checked her State Pension forecast (and read past the likely headline of £168.60).

    If so what is she on track to get and would buying additional years (if possible) be a better investment?

    What prompted her to choose the DC option over the DB pension?
  • dado5dado5 Forumite
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    Hi there and thanks....Yes, checked her PTA and on course for full state pension at 67. Paid up NI deficiencies. 
    She was messed about by CS in not having a full contract at first, so not in any scheme then made permanent and at that time, our money was very tight so the DC option, where we decided her contribution (zero at one time) looked better. Plus if I recall, higher contributions from employer. Thanks again.
  • edited 29 February 2020 at 4:24AM
    JoeCrystalJoeCrystal Forumite
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    edited 29 February 2020 at 4:24AM
    That is quite interesting to hear about someone choosing a DC option rather than the DB pension, which is more generous. You two sat down and worked out the calculations for each scheme is better on paper and part of your retirement provision altogether?

    I mean a quick back of the envelope calculation for DB pension scheme is that assuming retiring on SPA in eight years and on 24k can expect a pension of £4,454.4 a year at the monthly cost of £109‬ per month so you can expect to pay at least £10,464 for eight years and see all your contributions repaid in less than three years with index-linked guaranteed pension for life plus spousal pension.

    The DC pension, on the other hand, using the same assumptions will see the employer paying in 14.75%+3% matched (£355 per month) and the employee paying in (£60 per month), assuming a reasonable growth expectation, you might get a fund worth £43,000 if you are very lucky.


  • dado5dado5 Forumite
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    Hi there and thankyou for responding....we were pretty much clueless when making the choice about 15 months ago. And we were in a debt DMP so money was tight and the DC option looked right at that time. We are really grateful for your thoughts here and I guess you are saying that our choice was probably wrong  and that the Alpha DB scheme was the one we should have taken? I know we can switch to Alpha so will do if need be. As of now my wife intends to work for hopefully another 8 years (until 63yrs old) and current salary is around £25k. We also are in a much healthier finance position now (having paid off mort and coming to end of dmp) and are able to use about £400pm to top up/buy additional pension contributions (AVCs?) or should we just save that? Sorry if we come across as financially naive - we are (at least I found this forum though)! Thanks
  • MallyGirlMallyGirl Forumite, Board Guide
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    You need to look at yourselves as a couple - how is your pension provision looking
    I'm a Board Guide on the Debt-free Wannabe, Loans & Credit Cards boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Board guides are not moderators and don't read every post. If you spot an inappropriate or illegal post then please report it to [email protected]
    Any views are mine and not the official line of MoneySavingExpert.com.
  • dado5dado5 Forumite
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    Thankyou...do you mean something like the following? I'm on a CS pension of £15k pa. And working pt on £19k pa and will work probably until my SPA at 66. My wife works ft on £25k pa paying into a partnership pension as above and is looking to finish at around 63 in 8 years time Her SP starts at 67.
    In 8 years from now when both of us hopefully have retired  we will have my index linked CS Pension, my SP, and looking like a paltry partnership pension for my wife. 
    I suppose the real question from us is what can we do to boost my wifes works pension - (move it to Alpha, buy additional pension, etc). We have financial capacity to now do this  .. Thankyou so much.   
  • edited 29 February 2020 at 10:27AM
    Dazed_and_C0nfusedDazed_and_C0nfused Forumite
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    edited 29 February 2020 at 10:27AM
    Moving to Alpha is definitely worthy of further consideration based on JoeCrystal's comparison.  If you took £4.5k out of partnership it would soon be gone whereas Alpha will pay that for the rest of her life.  Or you could stay in the Partnership scheme and take a much smaller pension but Alpha looks like the way to go.

    She will have a small pension for 4 or 5 years until State Pension kicks in so if she opened a personal pension or SIPP and contributed the £400/month there could be two advantages.  Firstly it will get basic rate tax relief added by the pension company so she has £500 in her fund.  When she stops work she can take a significant amount each year without paying tax as she will have plenty of unused Personal Allowance.  If she has an Alpha pension of £4.5k she could withdraw another £8k of taxable income with no tax to pay.

    The amount she would want to withdraw would obviously depend on the total fund at that time and how long she wanted it to last and also what she decided to do with the existing Partnership fund.

    But with another £8-9k State Pension starting at age 67/68 she doesn't necessarily have to make the partnership and any personal pension/SIPP last for ever.

    She might be able to continue contributing into the Partnership fund (without the employer contributions) if she moves to Alpha but you would have to check that with her employer.  Although she might prefer a completely separate provider for this £400/month.
  • dado5dado5 Forumite
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    Yes definitely worth looking back at Alpha. I think another thing though that put us off Alpha was that it would be paid from SPA but my wife didn't want to work until 67 (a mum of 5 needs some rest!)...like my pension though (classic) I appreciate it would be reduced if taken early. I've just spotted that if we now want to move to Alpha for 20/21 we need to do so by mid March and if we want to pay additional.....need to go shopping now but thanks to all so far for giving more info and support. Really worthwhile...I confess I'm still not fully sure of course but at least you've given me things to thinks of.....thanks again
      
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