LGPS vs Civil Service Alpha

BlueMickey

I've just been offered a new job with the Civil Service and am currently weighing up my options, one of the big considerations for me is around the pension.
I'm 33 y/o and have been in the LGPS since 2004. At my current employer I contribute 9.8% of my salary, and they contribute a further 25%...which I think is unheard of.
I'll be getting a slight increase on salary (around 8%), and would be enrolled on the Alpha Pension scheme which I would contribute 7.35% with the CS adding 2.32% every year. 
I'm thinking of taking the job, and am currently negotiating the offer, but could use some advice on pensions; specifically:
a) would I be mad to take the role, with such a difference in pension contributions. Everywhere you read you're expected to contribute around10-15% of your salary for a good retirement, with the new scheme I'd be building a pot of less than 10%.
b) would it be worth my while to transfer my LGPS pension pot into the Civil Service

Any advice appreciated. Thank you!

hugheskevi

BlueMickey said:

I'm 33 y/o and have been in the LGPS since 2004. At my current employer I contribute 9.8% of my salary, and they contribute a further 25%...which I think is unheard of.

The employer contribution rate is irrelevant, it is the benefits you accrue which are important. For the LGPS you accrue 2.04% of pensionable earnings for each year you work.

If it makes you feel good, the employer contribution rate in the Civil Service scheme is at least 27.9%, but it is meaningless as all that matters is the pension you accrue for your contribution.

I'll be getting a slight increase on salary (around 8%), and would be enrolled on the Alpha Pension scheme which I would contribute 7.35% with the CS adding 2.32% every year.

Not quite right. You contribute 7.35% of pensionable earnings and in return you accrue 2.32% of pensionable earnings for each year you work.

a) would I be mad to take the role, with such a difference in pension contributions. Everywhere you read you're expected to contribute around10-15% of your salary for a good retirement, with the new scheme I'd be building a pot of less than 10%.

The Civil Service pension is better - it costs less and you accrue more. You are completely misunderstanding how the schemes work, and the difference between accrual rate and contribution rate.

BlueMickey

Thank you so much for that, that’s all I needed. I’ve never really taken much notice of pensions other than to pay into them and forget about them so this has been handy advice. 

Would you say its worth transferring my LGPS pot under the Pensions Club scheme, and if I need to get advice on the matter what I should take into account? 

hugheskevi

BlueMickey said:

Would you say its worth transferring my LGPS pot under the Pensions Club scheme, and if I need to get advice on the matter what I should take into account? 

For your CARE pension It doesn't make much difference, as the pension increases in line with CPI in either scheme, whether transferred or not. In favour of transferring it is to have it all in one place and it could be better in some low probability circumstances, such as ill-health. However, if September CPI is negative (as it could easily be, either this year or in future years), if left as a deferred award in LGPS the pension would not go down, but if in the Civil Service as an active pension it would go down.

For final salary component, it mostly depends on how you expect your future salary to increase compared to inflation (as the LGPS pension increases by CPI if left as a deferred pension).

Complicating all of this is McCloud judgment and how it will be applied to LGPS given the final salary underpin the LGPS used instead of transitional protection the other schemes used...but that is another story and one hyubh and others are better placed than me to go into.

hyubh

At my current employer I contribute 9.8% of my salary, and they contribute a further 25%...which I think is unheard of.

I'll be getting a slight increase on salary (around 8%), and would be enrolled on the Alpha Pension scheme which I would contribute 7.35% with the CS adding 2.32% every year.

Being DB schemes, contribution rates are irrelevant for the 'worth' of either pension (or rather: are when the comparison isn't with a DC scheme. Were that to be the case, while not exactly like-for-like, it would give an indication in the generosity of the DB alternative). That said, you aren't comparing the same thing - 2.32% is the accrual rate, not the contribution rate. Normally accrual rates are expressed as fractions (the civil service scheme is an oddity in not); the LGPS' is 1/49, which is just over 2.04%, i.e. slightly lower than the civil service's.

Everywhere you read you're expected to contribute around 10-15% of your salary for a good retirement, with the new scheme I'd be building a pot of less than 10%.

That '10-15%' (should really be more depending on age) is in relation to a DC scheme. Both the LGPS and Alpha DB schemes blow that out of the water, if for less flexibility (though the LGPS still allows for transfers out to a DC arrangement if you really wanted that). The 2.32%/2.04% concerns the proportion of your pay, for each year in the scheme, that (revalued, i.e. indexed for inflation) then becomes an annual income for life. This is completely different to 10%-15% of your pay for each year being invested as you go along.

would it be worth my while to transfer my LGPS pension pot into the Civil Service

This would be a so-called 'Club' transfer. Different parts would be treated differently:

- Your CARE pension in the LGPS (i.e. pertaining to membership ['service'] from April 2014) would go across pretty much like-for-like.

- The remainder of your LGPS pension would be converted to a final salary pension credit in the civil service scheme (technically the Nuvos section rather than Alpha). In the LGPS, your final salary benefits carry an NRA of 65, with a small amount of '85 year rule' protection for the service from when you joined to March 2008. This would become a single tranche of benefit in Nuvos, all still final salary, but with a single NRA of 65. Given that, the service credit will probably be marginally higher than the LGPS service forgone, depending on any other differences in benefit structure.

RetSol

FWIW, my thought on this is that, at 33, and with a solid public sector pension contribution record behind you already, you are young to be putting the pension cart before the career horse.. Do you want the civil service job?  Will it improve your career and/or earnings prospects in the longer term or detract from them?  What about other factors such as location and work/life balance?  These seem to me to be far more important considerations for someone of your age than the minutiae of the pension arrangements.  You have at least three decades of working life ahead of you.. From a civil service pensioner! 

BlueMickey

RetSol said:

FWIW, my thought on this is that, at 33, and with a solid public sector pension contribution record behind you already, you are young to be putting the pension cart before the career horse.. Do you want the civil service job?  Will it improve your career and/or earnings prospects in the longer term or detract from them?  What about other factors such as location and work/life balance?  These seem to me to be far more important considerations for someone of your age than the minutiae of the pension arrangements.  You have at least three decades of working life ahead of you.. From a civil service pensioner! 

Hi. Yes it’s a positive career move and will be a great addition to my CV over my current employer. Location isn’t as good, I currently commute 15 minutes and have an embarrassment of riches in 50 days holiday (I know!). Swings and roundabouts but career progression and exposure should be greater at Civil Service I’m hoping. 

Thanks for all your help everyone. 

Mojo4960

I'm 55 have 34yrs service in LPGS scheme. I have been looking at change in career / role. I have found two jobs both with considerable  lower salaries.  One of the jobs is with the civil service which is 10k lower than my current salary the other is with a similar LPGS scheme but is 20k lower in salary. I know you all might think me mad but i 'm itching for a change in role. What advice would give regarding what would be best for my pension.

hyubh

Mojo4960 said:

I'm 55 have 34yrs service in LPGS scheme. I have been looking at change in career / role. I have found two jobs both with considerable  lower salaries.  One of the jobs is with the civil service which is 10k lower than my current salary the other is with a similar LPGS scheme but is 20k lower in salary. I know you all might think me mad but i 'm itching for a change in role. What advice would give regarding what would be best for my pension.

Assuming the lower salaries would be because of a drop on grade rather than going part time, then in either case, keep the existing pension where it is. If you took a new job with LGPS membership, this would require explicitly electing for separate benefits; with another public sector scheme, that would be the default.

As to between the Civil Service scheme and the LGPS, they are very similar, but I'd say the former is slightly better (slightly higher accrual rate yet slightly lower contribution rates, particularly at the top end - frankly, the CSPS employee contribution rates are ridiculously low). However, if you're looking for a change in role, don't rule out looking for private sector opportunities, particularly ones where your LG experience has commercial relevance. The pension may be crap, but the take-home pay will be better, potentially much better. Conversely, if you're just looking to wind down, flexible retirement might be a possibility, and worth looking in to whether your current employer would go for it.