Alpha (DB) to Partnership (DC)?

jasser1492

My mortgage repayments are jumping up. So I am looking for ways to afford the payments. 

I am currently in the CS Alpha scheme. It’s a good scheme (other than the retirement age being 67) but it is contributory and I am contributing about £500 pounds gross every month.

I saw that I can switch to this - https://www.civilservicepensionscheme.org.uk/knowledge-centre/pension-schemes/partnership-pension-account/  which is non-contributory, and based on my age my employer will contribute about 15% of my salary. I don’t have to contribute but they will match fund up to another 3% if I do.

So if I switch I will be maybe £200 or more better off after tax, which will really help. I appreciate a DC scheme is not as beneficial as a DB scheme so will be worse off upon retiring. 

My questions are:

• If I switch into this scheme what happens to all my contributions under Alpha? I wouldn’t want to transfer them in to a DC scheme - could they be left in Alpha?

• And what happens to the death in service benefits I had under Alpha - would I now lose those?

I will email the scheme administrators but grateful for others thoughts.

NedS

jasser1492 said:

My mortgage repayments are jumping up. So I am looking for ways to afford the payments. 

I am currently in the CS Alpha scheme. It’s a good scheme (other than the retirement age being 67) but it is contributory and I am contributing about £500 pounds gross every month.

I saw that I can switch to this - https://www.civilservicepensionscheme.org.uk/knowledge-centre/pension-schemes/partnership-pension-account/  which is non-contributory, and based on my age my employer will contribute about 15% of my salary. I don’t have to contribute but they will match fund up to another 3% if I do.

So if I switch I will be maybe £200 or more better off after tax, which will really help. I appreciate a DC scheme is not as beneficial as a DB scheme so will be worse off upon retiring. 

My questions are:

• If I switch into this scheme what happens to all my contributions under Alpha? I wouldn’t want to transfer them in to a DC scheme - could they be left in Alpha?

• And what happens to the death in service benefits I had under Alpha - would I now lose those?

I will email the scheme administrators but grateful for others thoughts.

I cannot answer your specific questions, but personally I think this would be a huge mistake. Alpha is worth around a third of your salary. In contrast, the DC scheme is contributing 15% (or up to 18% if you also contribute), so is giving you around half the benefits for a £200 saving / increase in take home pay. You would probably need to contribute 15% of your salary in addition to the 18% employer contribution to be comparable.

How old are you? The older you are, the more valuable Alpha is.

jasser1492

NedS said:

jasser1492 said:

My mortgage repayments are jumping up. So I am looking for ways to afford the payments. 

I am currently in the CS Alpha scheme. It’s a good scheme (other than the retirement age being 67) but it is contributory and I am contributing about £500 pounds gross every month.

I saw that I can switch to this - https://www.civilservicepensionscheme.org.uk/knowledge-centre/pension-schemes/partnership-pension-account/  which is non-contributory, and based on my age my employer will contribute about 15% of my salary. I don’t have to contribute but they will match fund up to another 3% if I do.

So if I switch I will be maybe £200 or more better off after tax, which will really help. I appreciate a DC scheme is not as beneficial as a DB scheme so will be worse off upon retiring. 

My questions are:

• If I switch into this scheme what happens to all my contributions under Alpha? I wouldn’t want to transfer them in to a DC scheme - could they be left in Alpha?

• And what happens to the death in service benefits I had under Alpha - would I now lose those?

I will email the scheme administrators but grateful for others thoughts.

I cannot answer your specific questions, but personally I think this would be a huge mistake. Alpha is worth around a third of your salary. In contrast, the DC scheme is contributing 15% (or up to 18% if you also contribute), so is giving you around half the benefits for a £200 saving / increase in take home pay. You would probably need to contribute 15% of your salary in addition to the 18% employer contribution to be comparable.

How old are you? The older you are, the more valuable Alpha is.

Thank you, good advice.  I’m early 50s now.

hara____

Completely agree with NedS that you need to think carefully before moving out of Alpha given how valuable it is.

On your first question: if you did switch, nothing happens to your existing Alpha credit. It's just 'deferred' until you claim it, meaning it will continue to increase with inflation. In fact, the switching forms suggest you could move back to Alpha after 12 months if you wanted to.

One more detail on Alpha: people shouldn't interpret the 'normal pension age' to be more fixed than it is. You could claim it at 60. Of course, the annual amount you get would be reduced for early payment, but the reduction factors appear to be fair.

Ultimately, the Alpha/Partnership decision probably comes down to how much value you already hold across your DB and DC schemes. Do you have any Classic/Premium DB or similar? Could imagine a scenario where someone already had many years of DB service, meaning they wouldn't view further Alpha credit as being quite so valuable.

jasser1492

hara____ said:

Completely agree with NedS that you need to think carefully before moving out of Alpha given how valuable it is.

On your first question: if you did switch, nothing happens to your existing Alpha credit. It's just 'deferred' until you claim it, meaning it will continue to increase with inflation. In fact, the switching forms suggest you could move back to Alpha after 12 months if you wanted to.

One more detail on Alpha: people shouldn't interpret the 'normal pension age' to be more fixed than it is. You could claim it at 60. Of course, the annual amount you get would be reduced for early payment, but the reduction factors appear to be fair.

Ultimately, the Alpha/Partnership decision probably comes down to how much value you already hold across your DB and DC schemes. Do you have any Classic/Premium DB or similar? Could imagine a scenario where someone already had many years of DB service, meaning they wouldn't view further Alpha credit as being quite so valuable.

Thank you, very helpful. I had spotted that I could potentially switch back to Alpha later on, which I would do if things become a little easier.

I do have deferred Nuvos and Classic pensions, plus 3 other defined benefit pensions from other former employers, so as you say that does give me some flexibility.

Lots to consider. thanks again!

Marcon

jasser1492 said:

My mortgage repayments are jumping up. So I am looking for ways to afford the payments. 

I am currently in the CS Alpha scheme. It’s a good scheme (other than the retirement age being 67) but it is contributory and I am contributing about £500 pounds gross every month.

I saw that I can switch to this - https://www.civilservicepensionscheme.org.uk/knowledge-centre/pension-schemes/partnership-pension-account/  which is non-contributory, and based on my age my employer will contribute about 15% of my salary. I don’t have to contribute but they will match fund up to another 3% if I do.

So if I switch I will be maybe £200 or more better off after tax, which will really help. I appreciate a DC scheme is not as beneficial as a DB scheme so will be worse off upon retiring. 

My questions are:

• If I switch into this scheme what happens to all my contributions under Alpha? I wouldn’t want to transfer them in to a DC scheme - could they be left in Alpha?

• And what happens to the death in service benefits I had under Alpha - would I now lose those?

I will email the scheme administrators but grateful for others thoughts.

You could also look on the website and get immediate answers, hopefully in language which is reasonably straightforward (and then follow up with a question to the administrators if you need clarification in relation to your own position - obviously they can only confirm facts, not advise you on what might be best).

Nobody seems to have answered you on DIS. Have a look at https://www.civilservicepensionscheme.org.uk/knowledge-centre/pension-schemes/alpha-scheme-guide/death-benefits-section-06/

hugheskevi

On Death in Service, your surviving partner would receive alpha survivor benefits on a deferred members basis (37.5% of pension) and a lump sum equal to 5 years payment of the deferred pension. They would also get a payment of 3 x salary from Partnership death beneifts.

If you died in service as an active member of alpha the death benefits would be enhanced and a lump sum of 2 x salary would be payable.

Admiral_Barbarossa

Do not take from your future self to pay for today. Say in the DB scheme. End of!

german_keeper

Admiral_Barbarossa said:

Do not take from your future self to pay for today. Say in the DB scheme. End of!

I don't agree with this at all. The default position should always be to stay in Alpha, and I think for 90/95/99% of people it is the right choice. Indeed a few years ago when my daughter joined the CS at the age of 23 I told her Alpha straight away. She asked why I was in Partnership; I explained and to some extent I think she understood but then her 23 year old self took over and she moved onto something far more interesting!!
 
The 2 reasons I can think of that Partnership might be a realistic option is, if you really can't afford the Alpha contributions or as a DC scheme Partnership gives you more flexibility to retire earlier. Clearly anyone living to average life expectancy will receive more overall from Alpha but there will highly likely be a large discrepancy in income pre and post SPA. Drawing down all your Partnership before State Pension might make sense.

Lots of things to consider, how much pension provision do you and your partner, if you have one, already have; is it DB or DC, if DB what is the inflation uprating and what is the spouse provision if you pass first; what is your position regards state pension; employee contributions to Partnership are lower; and as the old saying goes this list is not exhaustive.

A further consideration in CS scheme, do you hope/expect to be promoted before you retire. If so Alpha may be best if you have significant entitlement in a Legacy scheme because your pension in the Legacy scheme will be based on your salary when you retire. If not then joining Partnership makes your legacy pension deferred and will then increase by CPI rather than effectively increase by your annual pay "rise" due to the final salary issue. Do you think your salary will match inflation in future? My salary lost over 20% to CPI from 2010 to 2019 when I took my Classic Pension, although because I went into Partnership in 2015 at least the last 4 years was based on CPI increases rather than salary "increases".