Civil Service Pension - Bomb proof ?

otb666

i am worried my DB Pension wont keep up with inflation as capped at 5%.  run by Railpen the ESPS pension.  

NedS

michaels said:

Trying to guess the inflation rate this September is making my calculations on how much Extra Pension I can buy this year without exceeding the annual allowance kinda interesting.  Anyone know what the current market consensus for September CPI is?

Same issue here. When I submitted my application to purchase added pension in January, I factored in 7.5% inflation but it is now looking like it could be even higher. I have some carry forward available, but have still gone all in on added pension this year to capture the high CPI uplift (I normally split extra DB and DC contributions roughly evenly). I have a bit of margin so can max out with the SIPP after the Sept inflation reading is published and I know exactly where I stand. I can accommodate 10% inflation using available carry forward without breaching the Annual Allowance. I had naively modeled a 3.1% pay rise which has since been capped at 2% max, so if CPI inflation comes in above my 7.5% estimate, I at least gain a little margin back on the lower pay rise :-(
Of course the upside to a very high CPI reading this year with a potentially lower reading next year, means that next year the initial input and final input values will see the benefit with the initial value being high(er) and the final value low(er) enabling a potentially larger contribution next year or the opportunity to replenish some carry forward for future years.

nigelbb

SouthCoastBoy said:

Secret2ndAccount said:

Governor of the Bank of England spoke today:
"CPI inflation is expected to rise further over the remainder of the year, to just over 9% in 2022 Q2 and averaging slightly over 10% at its peak in 2022 Q4"
So 9% according to the man in charge. He says it's largely due to energy prices, and will return quite quickly to more normal levels. Could be below 2% within 2 years.

Quite a readable report here:
https://www.bankofengland.co.uk/monetary-policy-report/2022/may-2022

I would be very surprised if anywhere near 2% in 2 years. I think inflation will be over 5% for the next 4 or 5 years. Can see it getting higher than 9% by q3 as well. So far the boe inflation forecasting has not been great, https://www.bankofengland.co.uk/monetary-policy-report/2021/november-2021

That report was before the Russian invasion of Ukraine. The Governor's current prediction takes account of that. Good luck with the job application for the Governor's job as you obviously know better.😀

marlot

otb666 said:

i am worried my DB Pension wont keep up with inflation as capped at 5%.  run by Railpen the ESPS pension.  

I'd love a cap at 5%.  My major pension is capped at 3.5%

Andy_L

TELLIT01 said:

What I should have added is that I have a pension from another former employer which has increased by more than the CS pension.  

Is it a DB or a DC pension

In %age terms or in £terms?

In total pot value or in annual pension terms

Did you work there for longer/shorter than the CS and for more/less money?

Regardless, it's highly likely to be an apples & oranges comparison, about the only way it isn't is if everything else is equal and the old pension is one that retained RPI indexation when the public sector changed to CPI.

AndrewB22

At the risk of sounding like a weirdo, and also of taking the thread off topic, nothing is ever bomb proof.  Spectacularly unlikely things happen all the time.  If we lived in Germany in the 1930s, or Japan in the 1940s, or Argentina after the 1930s, we wouldn't be wise to think our goernment pensions were bomb proof. Argentina was a conservative, wealthy country until the 1930s, at which point it collapsed into a century of instability and relative decline.  In 1910, GDP/capita in Argentina was broadly equal to Britain.  Today it is 40% of Britain's.  We cannot guarantee we're not the next Argentina.

The UK government is obviously extraordinarily unlikely to default on its obligations in our lifetimes, and if it did we'd all have bigger problems than our pensions.  But it's not impossible.  Government-backed, but unfunded, DB pensions are ultimately at risk of government policy change or government failure. 

Everything has risk.  A good way to reduce risk is not to concentrate it all in one thing, including reliance on HMG.