Civil Service Alpha

catherinevbrown

Hi all
I am 25. I am a civil servant on £30k.

I have approx £30k in a DC pension with Standard Life from an old job. I have recently joined civil service Alpha scheme. 
I pay monthly into an Alpha Pension and S+S ISA which I intend to use towards retirement.
I want to retire early ideally 55!

The Alpha pension is completely new to me coming from the private sector and even after doing a lot of reading and research around it I still can't get to grips with it!

I believe I can pay into an EPA to allow me to retire 3 years early however, I want to retire at 55 so is it even worth doing this if I will still have to pay a fee to get access early?
Would I be better to move my DC pension into a SIPP and contribute monthly to bridge the gap between 55 and retirement age rather than transfer DC into Alpha?
Finally, I used to pay an AVC in my old DC pension. What is the benefit of doing AVC vs added pension?


Any guidance or useful links would be appreciated! 

NedS

Dealing with the generics first, you basically have two (pension) options when considering early retirement. You can use a DC/SIPP to 'fund the gap' between early retirement (55) and when your DB and state pensions kick in (68), or you can look to take your DB pensions early (currently from 57 for you) at a reduced rate - this is known as actuarial reduction. Or you can do a combination of both.

In terms of paying more into your pension(s), again you have two choices. You can make extra contributions to your SIPP or via AVCs into DC pots. Here you have a cash pot which is invested and relies on investment growth and allows you to access it flexibly from age 57. Or you can pay extra into your Alpha DB pension (through added pension or EPA) which gives you a promise to pay you an inflation linked income for life.

If you choose the latter, you have two choices - Added Pension or EPA. Both cost around the same and effectively buy you the same thing, although there are subtle differences. If you bought EPA of 3 years, you would receive your standard pension 3 years earlier with no reduction (so you would get your full unreduced pension at 65 instead of 68). Added pension gives you a larger pension at 68. However, if you took that larger pension 3 years early at 65 with actuarial reduction, it would work out roughly the same as the EPA route - roughly the same costs to you and same pension at 65.