Civil Service Alpha or Partnership for Old Newbie

mrkjd

At 55 years old and a life working overseas with no pension arrangements I have been offered a CS job which will (hopefully) see me to retirement at 67 back in blighty. I paid voluntary NI contributions whilst overseas so am at least likely eligible for a State Pension but a (belated) priority moving forward is to try and maximise my pension by increasing contributions etc. Salary is circa £35k and I would ideally like a private pension of around £20k. My wife has her own arrangements which should see our combined pension income healthy. 

So first question is - Alpha or the Partnership? The Alpha scheme seems very good and accrues better but is it a better mechanism for someone my age who wants to increase contributions with a view to monthly pension income over lump sums etc?

In my brief research I read somewhere that Alpha accrues at roughly 2.4% salary per annum so after 10 years I'd be looking at roughly 9k pension. I also read that I would be contributing roughly 7% of my pensionable salary in to the scheme to get this return and could make additional contributions up to a max total contribution ( which I think includes the "normal" contribution) of £7k per annum. I freely admit however to getting lost in the maze of deductions vs lump sums and different contribution acronyms!

My no doubt naive maths works this out as 7% salary is roughly £2450 per year for me,  so £7k is like 2.9 years contributions. Great! 2.9 years equiv. contributions over 10 years is 29 years. So BINGO - 29 x 2.4% accrual rate =69.6%of my salary or £24k per annum! I can therefore achieve what I want.

No doubt I'm being an idiot. Can someone please run through what the actual likely scenario is and what I should consider doing to achieve that £20k pension? I will get further advice once my feet are under the desk but I'd like to have a rudimentary understanding of my options before I start so I can get set up right from the outset.

oxfordowl1

I think your calculation forgets that any contributions above the standard contribution (which for a £35k full time salary is about 5%) do not attract further employer contribution. So unfortunately your calculation is too optimistic. Buying additional Alpha pension is quite a good deal, but nowhere near as good as that.

MX5huggy

Go Alpha. 

But your maths is going up the wrong tree. 

So without checking yes after 10 years you get a £9k pension but that’s because on top of your 7% your employer is contributing at a guess 25% plus as well. 

So if you contribute 2.9 times as much because your employer will not do the same you won’t get 2.9 times the pension out. If you’re allowed to make a contribution big enough to double your pension you will find it very expensive. See 2B here

https://www.civilservicepensionscheme.org.uk/members/alpha-scheme-guide/

look at the AVC option offered and running your own SIPP. 

Dazed_and_C0nfused

With Alpha you would pay (before tax relief) £1,907.50 and accrue a pension of £812.

The employer contributions have no impact on this.

After 10 years of no pay rises you would have accrued £8120 but each year an inflation element is applied so the actual value would be slightly more.

You could build up a decent pot with partnership as the employer contribution (for that scheme) is included but the chances of this being enough to buy an inflation proofed pension of £8,120 is doubtful.

hugheskevi

So first question is - Alpha or the Partnership? The Alpha scheme seems very good and accrues better but is it a better mechanism for someone my age who wants to increase contributions with a view to monthly pension income over lump sums etc?

Alpha would appear ideally suited to your needs, given it provides an annual pension income and you do not appear to want to retire before State Pension age.

In my brief research I read somewhere that Alpha accrues at roughly 2.4% salary per annum so after 10 years I'd be looking at roughly 9k pension. 

2.32%, so closer to £8k payable from State Pension age (67) after 10 years.

I also read that I would be contributing roughly 7% of my pensionable salary in to the scheme 

5.45% of pensionable 

and could make additional contributions up to a max total contribution ( which I think includes the "normal" contribution) of £7k per annum. es the "normal" contribution) of £7k per annum. 

You can purchase extra pension ("Added Pension") up to a limit of an annual pension amount that is a little over £7,000 p/a. The cost of this will be something close to £100,000 and you can contribute as much as you like each year unless you are affected by the limit. So, for example, you could contribute £10,000 each year to buy Added Pension if you wished, until you hit the limit in about 10 years time.

My no doubt naive maths works this out as 7% salary is roughly £2450 per year for me,  so £7k is like 2.9 years contributions. Great! 2.9 years equiv. contributions over 10 years is 29 years. So BINGO - 29 x 2.4% accrual rate =69.6%of my salary or £24k per annum! I can therefore achieve what I want.

No doubt I'm being an idiot. 

That is a reasonable and refreshingly frank assessment  

If you choose to pay more to enhance your pension, there is no employer contribution - you bear the cost of Added Pension yourself. 

So after 10 years you would have about £8k main pension, plus whatever Added Pension you purchase. An Added Pension calculator is at this link.

Can someone please run through what the actual likely scenario is and what I should consider doing to achieve that £20k pension? I will get further advice once my feet are under the desk but I'd like to have a rudimentary understanding of my options before I start so I can get set up right from the outset.

Go into alpha, buy Added Pension, and plan to work past State Pension age. Defer State Pension, and your alpha pension and Added Pension get actuarial uplift for late claim (an increase of c5% per year claimed late). Continue to work until target income achieved.

mrkjd

Thanks everyone for your useful comments. I thought it was too good to be true! I now know I actually am a Financial Idiot but at least have some pointers on possible options and if does look like, with some planning, the wife and I will not be destitute. Didn’t really want to go on that First Class World Cruise anyhow! 

Dazed_and_C0nfused

Probably sensible to check your State Pension forecast now as well.

Ignore the headline figure (likely £179.60/week) and read it all to see what you have actually accrued to date.

Each year in your civil service job would add £5.13/week to that, subject to not exceeding £179.60.

If you reach £179.60/week then you are looking at combined Alpha and State pension of £17.5k at age 67 so a pretty good foundation of guaranteed and inflation proofed income.