Civil Service Alpha EPA vs Added pension

CloesUnc

hugheskevi said:

CloesUnc said:

Dazed_and_C0nfused said:

Added Pension lump sum from a separate payment requires all tax relief, including basic rate, to be reclaimed from HMRC. This can be done in a number of ways, but the most convenient is an in-year tax-coding adjustment. Alternatively it can be claimed via self-assessment, or through a letter to HMRC at the end of financial year with evidence of earnings and pension contribution.

Op, you also need to understand the tax relief difference between a separate contribution like that explained above and relief at source pension contributions.

With a payment like that explained above the tax relief is entirely dependent on your personal circumstances.  If you contribute say £5,000 and have paid £200 in tax then the maximum refund you can get is £200.

But relief at source contributions are not directly linked to the tax you pay so if you contributed £5,000 to a personal pension or SIPP the pension company would add £1,250 in basic rate tax relief even if you had only paid £200 in tax.

Relief at source isn't necessarily a better choice but there have been posters on here in the past who didn't understand the different in tax relief and assumed they would get 20% tax back from this type of gross payment.

Apologies, may I please just ask for clarification by way of an extreme example?

1. So if someone earns up to the annual allowance (for argument's sake) and then makes a lump sum of £5000, they would receive no tax refund. Because they would not have paid tax. They would have received the same tax relief had they paid via relief at source.

2. If that someone earns more than the tax allowance, they would receive tax relief on lump sum contributions, but only up to the amount of tax they had already paid. Is that correct? 

Thanks

Presumably you mean Personal Allowance (£12,570) rather than Annual Allowance (£40,000).

If such a person made a lump sum Added Pension purchase they would not be due any tax relief. They would simply write a cheque for the full cost of the Added Pension and that would be it. If they instead made a contribution to a personal pension using Relief at Source they would make a payment for 80% of the gross contribution they wished to make and the personal pension provider would add 20% basic rate relief automatically, despite them not paying any income tax (subject to the usual earnings limit).

Point 2 is correct, aside from noting that it is tax in the full financial year which matters, so not literally the amount of tax already paid. So for example an individual earning £40,000 could make a large lump sum contribution in May and would get still get tax relief based on their earnings across the full financial year, not just those already earned in April and May.

Apologies to both you and Dazed, yes indeed I meant the £12570 personal tax allowance.

Thank you both for your answers. That's much clearer now. 

FB13

If you pay for EPA-3 for alpha for some, but not all, years and are no longer in the civil service at 65 (and thus have a preserved pension), can you choose to take just the EPA-3 pot at 65 and wait to start collecting the rest of the pension until later? 

According to this guide, if you are still working for the civil service and choose to do partial retirement, it is possible to start collecting your EPA pots while waiting to collect your alpha pot connected to your SPA until later. But I haven't found an answer on if this is possible if you are no longer than active member. 

Part of my reason for asking is that I have several years in a LGPS which the retirement age is 65 rather than my SPA (68). 

hugheskevi

No. If a deferred member you have to take all of your pension.

Don't obsess about NPA though, it is just a reference point to calculate benefit from, you get less if taken before and more if taken later, see what the numbers are and how they best fit with your strategy.

sioioos

Hi, I've been scouring the internet looking for pension information and advice and I came across this thread. There is more useful information here than anywhere I found, even if I don't fully understand everything (I can't get my head around all of it).

I wonder if anyone could help me with a few questions?

I have just started a new job with an ALB and I have been enrolled in the Civil Service Alpha pension scheme for first time. I have two previous pensions, a Local Government Pension and a private one with L&G. Here are my circumstances:

Age 52
Previous pension 1 - LGPS Deferred pension, currently expected to pay out £17k when I I become 67
Previous pension 2 - L&G private pension, opened by my last employer, where I paid in for 2 years, with increased payments, and bonus sacrifices. This has a value of £80k.
New job salary - £68k.

I want to explore options to either reduce my retirement age (ideally I'd like to retire at 60) and boost my pension to the maximum.

Question 1 - Can I transfer both my previous pensions into the Alpha scheme and what are the pros and cons of doing so?

Question 2 - I read about EPA, and downloaded the calculator. It only seems to give me and -1 or -2 year option. Is the 3 year gone now? If I use it, does it mean I pay the additional amount until my retirement? Is there a way to reduce my retirement age even further?

Question 4 - Can I make AVC's with the Alpha scheme and is there a limit?

Question 5 - I could pay in lump sums from poor performing ISA's. Is it allowed under the scheme?

Question 3 - Are there any recommended independent financial advisors who specialise in Public Sector pension schemes?

I hope someone can help. Thanks in advance.

Dazed_and_C0nfused

1.  The DC one yes, providing it's within 12 months of you joining the civil service is the normal criteria.  LGPS possibly but that would have different rules/benefits to a DC transfer.

2.  You seem to be limited by your NPA.
https://www.civilservicepensionscheme.org.uk/knowledge-centre/pension-schemes/alpha-scheme-guide/alpha-scheme-guide-taking-control-of-your-retirement-planning-section-02/epa-section-02c/
The civil service/Alpha doesn't have a fixed retirement age, you can retire whenever you want.  Being able to afford to is another matter!

4.  Looks like it yes.  You will definitely be limited by the annual allowance (and any carry forward if available).  
https://www.civilservicepensionscheme.org.uk/your-pension/managing-your-pension/increase-your-pension/civil-service-additional-voluntary-contribution-scheme-csavcs/

5.  Alpha is a DB scheme so you can't simply pay extra like you can a DC scheme.  But there is an "added pension" option.
https://www.civilservicepensionscheme.org.uk/your-pension/managing-your-pension/increase-your-pension/added-pension/

3.  There may be but I suspect you could get all the info you need on here for free in a fraction of the time.  You may wish to use an IFA for any investment choices if you go down the AVC/personal pension/SIPP route.

roseyam

Just to say thank you to all the contributors, this has been a super helpful thread to read