CS Alpha Additional contributions

notsoyoung

I have a pension and I am about to get my state pension. Since retiring I have been working for the CS and I am in the Alpha pension scheme. My combined income puts me in the 40% tax bracket. I really enjoy my job and although I will shortly be 66 I may continue working until 70.  I am considering additional Alpha contributions of up to £700 per month. I know it's a gamble in terms of my life expectancy but I'm assuming I will at least avoid handing back 40% of my state pension in tax. Is this correct? I could just go part time or retire to keep the tax burden down but as said I enjoy working.  

MX5huggy

You can defer receiving your SP. 

If you reach State Pension age on or after 6 April 2016

Your State Pension will increase every week you defer, as long as you defer for at least 9 weeks.

Your State Pension increases by the equivalent of 1% for every 9 weeks you defer. This works out as just under 5.8% for every 52 weeks.

The extra amount is paid with your regular State Pension payment.

Example:You get £179.60 a week (the full new State Pension).

By deferring for 52 weeks, you’ll get an extra £10.42 a week (just under 5.8% of £179.60).

This example assumes there is no annual increase in the State Pension. If there is an annual increase, the amount you could get could be larger.

NedS

If you intend to work past state pension retirement age (which is also the NRA of the Alpha scheme), as well as deferring your state pension as suggested above, you could also consider deferring taking your Alpha pension too, which will also increase when deferring past the NRA, assuming you have the income to be able to afford to do so. This may be beneficial to avoid paying income tax (or a higher rate of income tax). More information available in the scheme guide here:

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

You should carefully calculate which would be more tax efficient for you - to contribute more into alpha to avoid HRT, and/or defer taking SP/Alpha until you decide to finish working.