Civil service pension

QrizB

Silvertabby said:

LateNightHunter said:

hugheskevi said:

LateNightHunter said:

You are absolutely right, but I will be moving mine at 55, so that the years I have spent building it up will be better than putting anywhere else and then I can move it to a DC to avoid the bold

You will need to move it out via another DB scheme which could be difficult - transfers to DC schemes are not permitted.

Silvertabby said:

Are you saying that you have a Civil Service DB pension that you intend moving to a DC scheme at 55?  If so, I hate to break this to you - but that isn't an option.  Unfunded CS pensions can only be transferred to another DB scheme which, realistically speaking, means another public sector pension fund.  

Oh!

I was following this guidance:

"A DB to DC transfer is a 'block transfer' if two (or more) members of a DB scheme transfer to the same receiving scheme at the same time. The transfer must represent the members' total rights under the transferring scheme (including any DC rights) and can't be split across more than one receiving scheme"

My partner and I are in the same scheme and we are the same age, so we were looking to both move at the same time

Block transfers only protect any enhanced rights, such as an earlier NRA or entitlement to a higher tax free lump sum.  
Where is that extract from?

It seems to be from here:

https://techzone.abrdn.com/public/pensions/tech-guide-db-to-dc-transfers

There's a much more useful paragraph on that page regarding unfunded public sectoor DB schemes:

Even though a member may have a statutory transfer right, unfunded public sector pension schemes (for example, the NHS Pension Scheme) cannot transfer benefits to a DC scheme capable of providing flexible benefits, such as income drawdown.

But transfers are allowed to DC schemes that don't provide flexible benefits. This allows members to transfer to buy conventional annuities, which could help those who are unlikely to get good value for money from their DB promise - for example, those in poor health or single people who have no need for a survivor's pension on their death.

Funded public schemes (for example, the Universities Superannuation Scheme) will allow transfers to DC schemes that offer income flexibility.

hugheskevi

adonis10 said:

Your post seemed massively negative towards the CS scheme but said it’s better than most DC. 

It contained all the negatives as you asked if you were missing something, hence I listed all the negative aspects you may not be aware of. There are many more positives, and as michaels points out ways to mitigate the less good aspects (although most members don't even know of many of these things).

What is a good comparison? For example, DC with employer conts of 10% as a ball park? How does it compare? Presumably due to the levels of growth available it is inferior for someone younger? I’m 39 so could in the theory attract growth of, say, 10% on a DC v CPI in DB?

The pension is much more generous for older members than younger members. For a younger member an employer contribution of 15%-20% might start to be comparable. For an older member it would be at at least 40%, and probably above 50%

Silvertabby

QrizB said:

Silvertabby said:

LateNightHunter said:

hugheskevi said:

LateNightHunter said:

You are absolutely right, but I will be moving mine at 55, so that the years I have spent building it up will be better than putting anywhere else and then I can move it to a DC to avoid the bold

You will need to move it out via another DB scheme which could be difficult - transfers to DC schemes are not permitted.

Silvertabby said:

Are you saying that you have a Civil Service DB pension that you intend moving to a DC scheme at 55?  If so, I hate to break this to you - but that isn't an option.  Unfunded CS pensions can only be transferred to another DB scheme which, realistically speaking, means another public sector pension fund.  

Oh!

I was following this guidance:

"A DB to DC transfer is a 'block transfer' if two (or more) members of a DB scheme transfer to the same receiving scheme at the same time. The transfer must represent the members' total rights under the transferring scheme (including any DC rights) and can't be split across more than one receiving scheme"

My partner and I are in the same scheme and we are the same age, so we were looking to both move at the same time

Block transfers only protect any enhanced rights, such as an earlier NRA or entitlement to a higher tax free lump sum.  
Where is that extract from?

It seems to be from here:

https://techzone.abrdn.com/public/pensions/tech-guide-db-to-dc-transfers

There's a much more useful paragraph on that page regarding unfunded public sectoor DB schemes:

Even though a member may have a statutory transfer right, unfunded public sector pension schemes (for example, the NHS Pension Scheme) cannot transfer benefits to a DC scheme capable of providing flexible benefits, such as income drawdown.

But transfers are allowed to DC schemes that don't provide flexible benefits. This allows members to transfer to buy conventional annuities, which could help those who are unlikely to get good value for money from their DB promise - for example, those in poor health or single people who have no need for a survivor's pension on their death.

Funded public schemes (for example, the Universities Superannuation Scheme) will allow transfers to DC schemes that offer income flexibility.

Thanks.  As I suspected, not written by a public sector pensions authority.

LateNightHunter - even if it had been possible for you and your partner to transfer out of the CS scheme, you would still have had to find an IFA willing to approve your requests.  You only have to read some of the other threads on these boards to realise how difficult/impossible that is.  And these are private sector DBs, with CETVs of 40 X the annual pensions being given up, whereas (GAD determined) public sector factors are more like 20 X.

NedS

adonis10 said:

Your post seemed massively negative towards the CS scheme but said it’s better than most DC. What is a good comparison? For example, DC with employer conts of 10% as a ball park? How does it compare? Presumably due to the levels of growth available it is inferior for someone younger? I’m 39 so could in the theory attract growth of, say, 10% on a DC v CPI in DB?

I'm a member of CS Alpha, and as @hugheskevi stated, overall there are many more positives than negatives, although they did an excellent job of highlighting the few negatives earlier in the thread.

I previously tried to calculate the rough cost of benefits. I calculated, using the formula to purchase Added Pension, that it would cost me roughly a third of my salary if I had to 'buy' the benefits I receive in Alpha as Added Pension. Even then, a 4% SWR on 1/3rd of a £50k salary would only yield just over half of the 2.32% accrual under Alpha.

For anyone over 50, it's a 24-caret gold plated pension.

adonis10

Thanks all.
Ok, so new job prospects. Let’s say both are £55k, one is a DC with employer contribution of 6% and the other is the DB scheme already referred to. How do I work out what is better long term?

Dazed_and_C0nfused

Really?

You would accrue £1,276 in a single year in Alpha.  Which, to a certain degree, is inflation proofed.

How much would you have to contribute into a DC scheme to get anywhere near that!

adonis10

Dazed_and_C0nfused said:

Really?

You would accrue £1,276 in a single year in Alpha.  Which, to a certain degree, is inflation proofed.

How much would you have to contribute into a DC scheme to get anywhere near that!

No, I get it but from the initial replies it seemed as though some folk didn’t rate it as highly as I initially did.

how do you compare that accrued amount to DC? As i did at the outset, I used an assumption of a 25 year retirement so 25 * 1276 = £31,900. Impossible to accrue that in a year in a DC scheme so seems fantastic. However that doesn’t factor in growth in a DC scheme, certainly at age 39 with 30 years to retirement.

Would really like a more scientific way to compare the two.

hugheskevi

adonis10 said:

Would really like a more scientific way to compare the two.

Use the Cash Equivalent Transfer Value factors to calculate the value of alpha for a 39 year old.

michaels

I work on DC contributions will grow by 2%pa in real terms (conservative) and would purchase an annuity of about 2.5% (or perhaps an SWR of 3.5%)

But then I value certainty.  You could even say for certainty the DC would need to be invested in index linked govt bonds that lose about 2% pa in real terms and then used to purchase an annuity to give the same value of benefit as the DB.

I took a 33% pay cut in 'nominal' pay to get my hands on alpha but then I also factored in transferring in a decent chunk of DC.

JoeCrystal

adonis10 said:

No, I get it but from the initial replies it seemed as though some folk didn’t rate it as highly as I initially did.

how do you compare that accrued amount to DC? As i did at the outset, I used an assumption of a 25 year retirement so 25 * 1276 = £31,900. Impossible to accrue that in a year in a DC scheme so seems fantastic. However that doesn’t factor in growth in a DC scheme, certainly at age 39 with 30 years to retirement.

Would really like a more scientific way to compare the two.

I indeed rate it as exceptionally high. It is one of the country's best pension schemes, so it's hard to beat that standard!

I can't believe you honestly think both are £55k, one is a DC with an employer contribution of 6%, and the other, the DB scheme, is remotely comparable! It compares ripe apples and rotten oranges. Rotten in case the employer's 6% contribution is not exceptionally high although it is decent within the private sector. to have that 6% rather than 3%. 

Remember that the DC pension pot depends entirely on your choice and the market's performance. In the last six months, I have seen a 27% drop from £112k to £81k in my only pension pot. I don't mind since I still got almost three decades left, but if I were planning to retire this year, it would be very worrying.

But having a DB pension scheme, especially if you got full index-linked and enough years in it, does not need to worry; it will pay out what you expect within the rules until you die. It does not matter if the economy goes into freefall; that is not your problem, but the funds, their employers/sponsors, HM Treasury, or the taxpayers' problem instead.

Indeed, the fantastic deals of the public sector pension scheme are the main attraction of working in the public sector in my eyes (should I lose my current job), even better if I can transfer my DC pot in. Don't forget all the extra whistles like ill-health retirements and other related stuff as part of the scheme.

Especially the accused pension is likely to be more generous than the actual salary increase.