USS to Alpha quote (DB to DB) - worth doing?

gtat

Hi All,

I moved from a university to Civil Service 11 months ago - I have one month left to transfer any old pensions in to Alpha. I posted previously about this and received some very helpful responses (see here: https://forums.moneysavingexpert.com/discussion/6263443/db-to-db-transfer#latest )

I have now received the quote for transferring the USS pension to Alpha, as follows (all in current prices):

• The USS CETV is £53k. The pension at current prices would be £2764 pa plus a lump sum of £8291. I believe the 'Normal Pension Age' for me would be 65 or 66 (I need to confirm this).
• If I transferred to Alpha, this would 'buy' £6144 pa but no lump sum. This is paid out from SPA which is 68 for me.

I'm no expert but, in my opinion, this transfer looks like good value? Even if I have to take the Alpha pension at 68, as opposed to potentially 65 (or possibly 66) with USS and with no lump sum, the higher annual payments for Alpha should mean I am financially better off after 3.5 years?

Alternatively, looking at page 18 of the Alpha 'Early Payments Reduction' guidance (https://www.civilservicepensionscheme.org.uk/media/538002/csops_erf-and-lrf-factors-and-guidance-01082019.pdf), if I took my Alpha pension from age 65 then a factor of 0.84 would apply. Therefore the Alpha pension of £6144 at SPA would be £5160 at age 65, which is also a good option.

Am I missing anything? It looks like it is worth doing to me.

NedS

Assuming 65 for USS and 68 for Alpha, you would break even after 4.9 years (i.e, at age 73). Assuming you don't need the lump sum and expect to live past 73, it looks like a good deal.

What about spousal benefits? I think they are more generous in USS (as a percentage), so that may be a factor is you have a spouse, but the higher Alpha annual pension may more than offset the lower percentage.

Another factor to consider is that USS CPI growth is capped at 5% whereas Alpha is uncapped, which may be important if we enter a period of high inflation (above 5%) in your lifetime. Unlikely at present given the BoE 2% target, but still a risk.

Thrugelmir

Would you like to start winding down earlier than 68? Perhaps going part time. Money isn't the factor to be considered. 

gtat

NedS said:

Assuming 65 for USS and 68 for Alpha, you would break even after 4.9 years (i.e, at age 73). Assuming you don't need the lump sum and expect to live past 73, it looks like a good deal.

What about spousal benefits? I think they are more generous in USS (as a percentage), so that may be a factor is you have a spouse, but the higher Alpha annual pension may more than offset the lower percentage.

Another factor to consider is that USS CPI growth is capped at 5% whereas Alpha is uncapped, which may be important if we enter a period of high inflation (above 5%) in your lifetime. Unlikely at present given the BoE 2% target, but still a risk.

Thank you - very useful. Good point about inflation!

I need to check the spousal benefits for USS, but for Alpha it is 37.5% of the full pension. 

Thrugelmir said:

Would you like to start winding down earlier than 68? Perhaps going part time. Money isn't the factor to be considered. 

Thanks. Yes, I am 34 now and hope to retire at 58. But a lot can happen in that time!

The actuarial reductions for Alpha don't look too bad in my opinion - if I took it early at age 65 then I would be financially 'better off' compared the the USS pension + lump sum from age 68.

If "money isn't the factor to be considered", could you please enlighten me as to what is? Thanks!

ussdave

I think USS is 50% spousal but I may be wrong.  It's not something I've paid much attention to beyond filling in the form to name the Mrs

gtat

A further question - if there is a chance that I may one day return to academia and a USS pension, would that be a reason to keep it now and not transfer it in to Alpha?

ussdave

I don't think that's a concern as any new USS benefit accrual would be under new terms anyway.  It may be different if you were to return within a year but probably still doesn't matter too much.  If the transfer is worth it it will be worth it regardless.

MX5huggy

Maybe use this link so you can get the same offer from both schemes is no lump sum at 68 or 65.

I don’t think there’s going to be much in it. None of the USS is in the investment builder section? 

https://www.ussbenefitillustrator.co.uk/modeller/index#about-you

hyubh

MX5huggy said:

Maybe use this link so you can get the same offer from both schemes is no lump sum at 68 or 65.

I don’t think there’s going to be much in it.

What have you been smoking... the CSPS 'offer' is clearly superior. Apply the 12/1 commutation factor to get like for like, and it's still better. SCAPE systematically undervalues public sector pension benefits compared to how equivalent liabilities are now assessed in the private sector...