Sense check amount of Alpha Added Pension accrued (Civil Service Pension)

pathsofdarkness

I have been paying £443.37 per month into my Civil Service Alpha Added Pension since April 2015 (aged 35). I realise that as I am paying a fixed amount each month that this will result in me buying a lower amount of Alpha Added Pension each year plus the fact that it costs more as I get older.

In 2018/19, this contribution bought me £796.60 but in 2019/20 the same contribution only bought me £599.

Whilst I expected my contribution to result in a lower amount of purchased Alpha Added Pension, I wasn't expecting it to be almost £200 lower. I asked MyCSP about this back in November 2020 (i.e. please double check the factor used) and it was only this afternoon they sent me the table below with the explanation:

 "Age related factors are applied to your contributions to the added pension scheme which will determine the annual pension awarded. This pension is increased each year in line with inflation."

Given it has taken them 4 months to reply to my first email (though to be fair that is probably down to Covid), I'm guessing they aren't going to answer my follow-up for a while.

So if anyone here has such knowledge of these things:

Question 1 (Edited): Does the revaluation row in 01/04/2018 look wrong? I can't get my head around it. The opening balance is lower than the closing balance in the row above it. And the revaluation on 01/04/2018 does not add up to the closing balance in the same row.

Question 2: Is there anyway I can check the factor used in 2019/20? It could be that this is all correct but the big change in amount accrued seems quite big.
Thank you kindly.

hugheskevi

pathsofdarkness said:

I have been paying £443.37 per month into my Civil Service Alpha Added Pension since April 2015. I realise that as I am paying a fixed amount each month that this will result in me buying a lower amount of Alpha Added Pension each year plus the fact that it costs more as I get older.

As well as ageing, the discount rate (effectively the assumed rate of return on contributions) has also reduced, from CPI+3% to CPI+2.4%. That doesn't sound much, but it has a very significant effect, especially the further away you are from retirement (and age 35 is very young in the context of a normal pension age of 68 - 33 years of a compounded annual loss of 0.6 percentage points is very significant).

Question 1: In 2017/18, why didn't the revaluation increase my closing balance?

September 2015 CPI was -0.1%, so there was no inflation increase in April 2016 uprating (well, there was, but as shown, it was a negative increase).

Question 2: Is there anyway I can check the factor used in 2019/20? It could be that this is all correct but the big change in amount accrued seems quite big.

The discount rate changed from CPI+2.8% to CPI+2.4% from April 2019/20. You can read more about it at links such as this one.

pathsofdarkness

the discount rate (effectively the assumed rate of return on contributions)

I've heard of the term "discount rate" before but never really understood it. This wording above in conjunction with the link you kindly provided makes it clear to me finally. This explains the increased factor that MyCSP have had to use (though I wish they had mentioned this in their email to me in the same way you've done it).

Question 1: In 2017/18, why didn't the revaluation increase my closing balance?

September 2015 CPI was -0.1%, so there was no inflation increase in April 2016 uprating (well, there was, but as shown, it was a negative increase)

Sorry, I didn't explain this question very well -- I have edited my question now, what I meant was:
"Does the revaluation row in 01/04/2018 look wrong?" I can't get my head around it. The opening balance is lower than the closing balance in the row above it. And the revaluation on 01/04/2018 does not add up to the closing balance in the same row.

The discount rate changed from CPI+2.8% to CPI+2.4% from April 2019/20. You can read more about it at links such as this one.

That is a very interesting link and perfectly answers the question I posed to MyCSP (but they didn't mention this at all). Thank you, I feel like I've learned something new today.

hugheskevi

pathsofdarkness said:

Sorry, I didn't explain this question very well -- I have edited my question now, what I meant was:
"Does the revaluation row in 01/04/2018 look wrong?" I can't get my head around it. The opening balance is lower than the closing balance in the row above it. And the revaluation on 01/04/2018 does not add up to the closing balance in the same row.

Question 1 (Edited): Does the revaluation row in 01/04/2018 look wrong? I can't get my head around it. The opening balance is lower than the closing balance in the row above it. And the revaluation on 01/04/2018 does not add up to the closing balance in the same row.

Apologies, I misread the question when making my previous answer, just jumping straight to the usual misinterpretation people make around negative increases, despite it not being the relevant year you described (which you did make clear).

I agree that it appears the 3% revaluation due as at 1 April 2018 seems not to have been applied correctly, despite being shown on the statement, resulting in no uprating being awarded. The £76.16 uprating looks correct, but the starting and closing values look wrong - I think they should be £2,538.74 and £2,614.90 respectively. It isn't very clear what has happened in that year, the figures just don't add up, I would definitely query it with MyCSP. It would also be helpful to post their response when you get it, as mathematical errors such as appear to have happened here really shouldn't be taking place.

pathsofdarkness

hugheskevi said:

It would also be helpful to post their response when you get it, as mathematical errors such as appear to have happened here really shouldn't be taking place.

I've been sending emails to MyCSP every week since February for an explanation but never received a reply. Then a colleague mentioned asking myCSP on twitter because that usually gets a better response. I didn't think that would work but it did and a couple hours later they had responded saying an email would be sent to me today. Response below (basically it was a typo on their end, not sure why it took so long to reply):

I am emailing you in regards to your Annual Benefit Statement query. Thank you for your patience whilst we investigated your query.

Upon investigation, the closing balance for 01/04/2017 – 31/03/2018 should be reflected as £2,538.74, with £2,614.90 reflected as the 01/04/2018 revaluation closing balance on the Annex A sent to you previously.

I would like to apologise for this typing error on my behalf. I have attached a corrected Annex A and breakdown of your Added Pension benefits accrued.

Should you have any further queries, please do not hesitate to contact us.

The correction is highlighted below: