Civil Service Alpha Annual Allowance Calculation

michaels

Anyone able to walk me through this?  Thanks

1) I joined CS this FY (mid April 22) so no existing DB to be upvalued.

2) I have transferred in from a DC pot, I understand there is no annual allowance implication for this even if I do get some inflation uplift to the amount of DB purchased?

3) I make the standard 5.45% contribution for 2.32% annual salary DB - I assume  this is based on total pensionable earnings. (eg £600)

4) I have purchased EPA which I think has been backdated to my joining date - I don't think this impacts AA

5) I have purchased a fair bit of added pension (eg £1000)

Can I simply add up all the DB 'earned' through standard pension and added pension up to end of March 22, uplift by the September 22 (?) inflation rate (10.1%) and multiply by 16?

What about the period from 1st - 5th April 23?

Ta Muchly

hugheskevi

Yes to everything - 1st - 5th April counts as well, your payroll sends details of the part month pensionable earnings accrued on those 5 days, so add them into the calculation.

michaels

hugheskevi said:

Yes to everything - 1st - 5th April counts as well, your payroll sends details of the part month pensionable earnings accrued on those 5 days, so add them into the calculation.

Thank you.  Is it as simple as pro-rata 5 days (/30) of April contributions?  Do these also get the cpi uplift or does this only apply to DB accrued to the end of March 23?

NedS

I usually just ignore the 5 days (1-5th April) as they almost cancel each other out at each end of the year, when performing approx calculations for AA. But yes, you can pro-rata your earnings for 1-5th April and calculate 2.32% pension accrual of those earnings which should be close enough.

I believe the CPI uplift is applied on 1st April, so you'd add on the additional 5 days accrual after the uplift has been applied (I think). Either way, it's not going to make a huge difference (less than £10 accrual based on an annual accrual of £600 - 5/365 x £600), and CPI of 10.1% of that is going to be less than £1.

Mental note for next year - add £10 to calculation to account for 1-5th April

hugheskevi

michaels said:

hugheskevi said:

Yes to everything - 1st - 5th April counts as well, your payroll sends details of the part month pensionable earnings accrued on those 5 days, so add them into the calculation.

Thank you.  Is it as simple as pro-rata 5 days (/30) of April contributions?  Do these also get the cpi uplift or does this only apply to DB accrued to the end of March 23?

Every payroll takes a different approach, but in theory it should not be pro-rata, it should be actual earnings - in most cases pro-rata will be accurate anyhow, but it wouldn't be for those who left mid-month, for example.

These 5 days will not get CPI uplift until 31st March 2024.

Universidad

michaels said:

Can I simply add up all the DB 'earned' through standard pension and added pension up to end of March 22, uplift by the September 22 (?) inflation rate (10.1%) and multiply by 16?

I'm actually a bit confused about a couple of things going on here. There's a misunderstanding somewhere, but it totally could be mine.

Are you trying to calculate the opening value for next tax year (April 23), or the amount of annual allowance that you will have used in this tax year? Or is this something about what happened to the value of the DC to DB transfer and I'm being really obtuse?

Just to be clear, it's the opening value that you factor in the inflation uplift, for calculating the annual allowance, not the closing value.

horsewithnoname

michaels said:

Anyone able to walk me through this?  Thanks

1) I joined CS this FY (mid April 22) so no existing DB to be upvalued.

2) I have transferred in from a DC pot, I understand there is no annual allowance implication for this even if I do get some inflation uplift to the amount of DB purchased?

3) I make the standard 5.45% contribution for 2.32% annual salary DB - I assume  this is based on total pensionable earnings. (eg £600)

4) I have purchased EPA which I think has been backdated to my joining date - I don't think this impacts AA

5) I have purchased a fair bit of added pension (eg £1000)

Can I simply add up all the DB 'earned' through standard pension and added pension up to end of March 22, uplift by the September 22 (?) inflation rate (10.1%) and multiply by 16?

What about the period from 1st - 5th April 23?

Ta Muchly

Don’t know all of these but 3. There are contribution bands which depend on your earnings, these are on the civil service pension website. 

The amount in any year is your pensionable pay for April to March. This is on your payslips. You are paid monthly in arrears, so though your pay for April technically includes part of the previous tax year, it is paid in the next tax year so is relevant in that year be it the 1-5 or 6-30 of April

michaels

Universidad said:

michaels said:

Can I simply add up all the DB 'earned' through standard pension and added pension up to end of March 22, uplift by the September 22 (?) inflation rate (10.1%) and multiply by 16?

I'm actually a bit confused about a couple of things going on here. There's a misunderstanding somewhere, but it totally could be mine.

Are you trying to calculate the opening value for next tax year (April 23), or the amount of annual allowance that you will have used in this tax year? Or is this something about what happened to the value of the DC to DB transfer and I'm being really obtuse?

Just to be clear, it's the opening value that you factor in the inflation uplift, for calculating the annual allowance, not the closing value.

My understanding is you uplift the opening value by last years inflation rate and the closing value by this years inflation rate and then the difference is your DB increase that you multiply by 16 to get your annual 'contribution' that you then compare against the AA.

This is straightforward for me because my opening balance is zero a a new joiner so my DB increase i just the value of new d b 'earned' this year upvalued by the this year (Sep22) cpi adjustment.  Transfers in are not assumed to show any change in value and thus are excluded from any AA calculation,

Universidad

michaels said:

My understanding is you uplift the opening value by last years inflation rate and the closing value by this years inflation rate and then the difference is your DB increase that you multiply by 16 to get your annual 'contribution' that you then compare against the AA.

Right - OK. So, I don't think you calculate the inflation uplift into the closing value. Just the opening value.

NedS

The steps taken to determine opening and closing values are defined in the following links, with examples:

https://www.civilservicepensionscheme.org.uk/your-pension/yearly-pension-update/pension-saving-statement/annual-allowance/

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm053301

Alpha has no lump sum so that is zero or can be ignored. As stated, your opening value this year is zero and your transferred in value is ignored for this year, but will form part of your opening value for next year.

michaels

Universidad said:

michaels said:

My understanding is you uplift the opening value by last years inflation rate and the closing value by this years inflation rate and then the difference is your DB increase that you multiply by 16 to get your annual 'contribution' that you then compare against the AA.

Right - OK. So, I don't think you calculate the inflation uplift into the closing value. Just the opening value.

But the 'closing amount' will consist of this years DB accrued which will include the annual CPI uplift that will be applied to the outstanding amount at the end of March - so if I accrue 2k of DB entitlement this year it will be increased to 2.2k (plus 10.1%) at the end of March that I will multiply by 16 and compare with £0 (starting balance) uplifted by 3.1% x 16.