Civil Service Alpha Annual Allowance Calculation

Universidad

Ah, OK, I think I see where you're coming from. Your end result is right. But there's a misunderstanding about how to apply the inflation calculation, which doesn't end up mattering because your opening value is zero.

The inflation you add to the opening value is an adjustment. You don't adjust the closing value for inflation. The closing value is just the value of your beneifts at the end of the tax year.

However, the value at the end of the year already includes the annual uplift. So you don't need to add it.

But this is how you look back at the year at it's end.

You are adding the uplift to the closing figure now because it hasn't happened yet. That's not one of the steps of calculating your annual allowance. That's you trying to figure out what your actual benefits value will be in April.

So let's pretend you're doing this calculation in May 2023, to make it clearer. 

Your closing figure is just whatever your pot was worth on April 5th. There's no adjustment needed, because that figure includes the annual uplift already.

Your opening figure is adjusted. It's adjusted by the same inflation uplift as your pension was just increased by, to calculate a truer increase in the value of your benefits.

So you're not uplifting your opening value by last year's inflation of 3.1%. Theoretically, that already happened, last year.

You're uplifting it by this year's CPI of 10.1%. That way you're comparing how much of your benefits are due to one year's accruals, rather than skewing things with inflationary differences.

So this would matter if your starting value wasn't zero. But 3.1% added to 0 is the same as 10.1% added to 0. So it doesn't matter.

But next year when you figure this out you will add next year's CPI to whatever this year's statement is worth, and that is your opening figure. And the closing figure is just whatever the value of the pension is right at that time - i.e. after that uplift happened.

michaels

Thanks - the reason for wanting to do the calc now is that I don't want to exceed the AA - so I know what DB I am accruing but don't know how much it will be worth come 5th April as it will have the CPI uplift applied.