Transfer DC Pension into Alpha Civil Service?

PeterC365

By way of an update, I had a pension joiner session and they may be lifting the 50% of salary rule given the recent pension changes. Will update when I hear more for those interested.

michaels

PeterC365 said:

By way of an update, I had a pension joiner session and they may be lifting the 50% of salary rule given the recent pension changes. Will update when I hear more for those interested.

Excellent news for new joiners, a bit annoying for those of use who joined a year ago and were limited to 50%....

PeterC365

So after much chasing I've eventually got a transfer valve from CSP.  

46 Yr old male, SIPP value £157700,

Alpha Pension £11655
Widow Pension £4370

It comes in different from the added pension calculator figures and the recent change to the Added Pension Calculator for 2024 is a good 10% less than the 2023 version. 

So now pondering what to do, I have another separate SIPP pot so this is about do I want to buy the "insurance" of a BD pension. 

Appreciate any thoughts from folks. 

JoeCrystal

An outstanding good deal. You are basically buying an annuity of 7.4% you know?  Roughly 68% more than what you could get in a 65 year old buying an index-linked annuity today.

hugheskevi

JoeCrystal said:

An outstanding good deal. You are basically buying an annuity of 7.4% you know?  Roughly 68% more than what you could get in a 65 year old buying an index-linked annuity today.

To be comparable, you need to take into account 20 years of investment growth, that alpha is payable from 67 (maybe 68) and that the annuity will be RPI rather than CPI. Those things are going to make material differences.

The quote is based on a discount rate of CPI+1.7%, which can thought of as the return after costs. Not an amazing return as a DC pension should return more over a reasonable period, but also not shocking given it is a risk-free asset (aside from changes to State Pension age and maybe inflation index).

JoeCrystal

hugheskevi said:

JoeCrystal said:

An outstanding good deal. You are basically buying an annuity of 7.4% you know?  Roughly 68% more than what you could get in a 65 year old buying an index-linked annuity today.

To be comparable, you need to take into account 20 years of investment growth, that alpha is payable from 67 (maybe 68) and that the annuity will be RPI rather than CPI. Those things are going to make material differences.

The quote is based on a discount rate of CPI+1.7%, which can thought of as the return after costs. Not an amazing return as a DC pension should return more over a reasonable period, but also not shocking given it is a risk-free asset (aside from changes to State Pension age and maybe inflation index).

Perhaps, but considering PeterC365 still has 20 years left until he can claim the pension unreduced, there is a lot of time for him to rebuild his DC pension scheme, especially when it comes to filling the gap between State Pension + CSPS age and whenever the person wants to retire.

PeterC365

Appreciate the comments, just by way of context I already have another DC SIPP availble that would bridge 55-67 so wouldn't need to rebuild. 

Is it reasonable to think that if I ran the numbers forward 20 years on the £157k, then I'd need to annual return of just over 5% to generate around £425k to then take a 4%withdrawl rate at 67 of £17k.  Which would be the approximate DB pension rate if the £11655 went up by 2%/annum

QrizB

Is that the same as saying you'd need to beat inflation by 3%? Or am I misunderstanding?

hugheskevi

PeterC365 said:

Is it reasonable to think that if I ran the numbers forward 20 years on the £157k, then I'd need to annual return of just over 5% to generate around £425k to then take a 4%withdrawl rate at 67 of £17k.  Which would be the approximate DB pension rate if the £11655 went up by 2%/annum

You could think that, but ultimately you are simply recreating what the actuaries do. The scheme sets the discount rate of CPI+1.7%. That is the target to beat (ignoring the guarantees on longevity and lack of investment risk).

MrJamez

PeterC365 said:

Would have been more helpful to ask this separately as you’ve now hijacked this post. People like you boil my urine!

I don’t mind haha!