Civil Service Alpha Statement @ 27

MrJamez

Hi folks,

27 years old and my Civil Service Alpha statement will be circa £3k when I receive my figure for this year in July.

Is this a reasonable figure? Thanks in advance.

Dazed_and_C0nfused

MrJamez said:

Hi folks,

27 years old and my Civil Service Alpha statement will be circa £3k when I receive my figure for this year in July.

Is this a reasonable figure? Thanks in advance.

Brilliant for just a single years service.

Not so much for the full 8 years.

But it's defined by the scheme rules, not the stock market so is presumably that's what it should be.

Universidad

MrJamez said:

Is this a reasonable figure?

You're in the Alpha scheme, so by normals standards an exceptionally high proportion of your salary has become a guaranteed pension. So it's very reasonable, in that sense.

However, I suspect what you're asking is whether 3K of annual pension in your late 20s means you are currently on track to retire comfortably. I get that 3K doesn't sound like a lot, but the answer is probably yes.

Assuming that you've been working since you were 22 in roughly the role you're in now, you've turned 5 years salary into 3K in retirement. (If you've done it in less time than that, even better.)

If you were to work another 35 years with the same scheme, and your salary never changed in real terms, you'd have an annual pension of 24K. That would compare very favourably with the average public sector pension (which I think was more in the realm of 15K per year).

Based on my experience your salary is likely to go up over time, but might not outpace inflation even with promotions, and the pension scheme is likely to be cut frequently, and be much less good as you get older. So it's good to re-evaluate regularly.

But on the trajectory you're currently on, you will come out ahead of the average, I think.

GunJack

Universidad said:

 the average public sector pension (which I think was more in the realm of 15K per year).

I think from memory it was more like £8-9k in the last few years..

Universidad

GunJack said:

Universidad said:

 the average public sector pension (which I think was more in the realm of 15K per year).

I think from memory it was more like £8-9k in the last few years..

I must admit that was a bit finger in the air, and 15K is too high an estimate.

But it's definitely higher than 8-9K by now - the mean public sector pension in payment in 2009 was about 8000.

Public sector pensions track (or in some cases exceed) CPI, so assuming another year of high inflation, it seems likely the average will be over 13K within 12 months, ignoring other potential changes (such as changes in demographics, remedies and changes to schemes, and the effect of salary supression on pension accrual).

GunJack

Universidad said:

GunJack said:

Universidad said:

 the average public sector pension (which I think was more in the realm of 15K per year).

I think from memory it was more like £8-9k in the last few years..

I must admit that was a bit finger in the air, and 15K is too high an estimate.

But it's definitely higher than 8-9K by now - the mean public sector pension in payment in 2009 was about 8000.

Public sector pensions track (or in some cases exceed) CPI, so assuming another year of high inflation, it seems likely the average will be over 13K within 12 months, ignoring other potential changes (such as changes in demographics, remedies and changes to schemes, and the effect of salary supression on pension accrual).

I was talking purely Civil Service, not sure about how including the rest of the "Public Sector" may or may not skew that figure, e.g. NHS pensions will probably make the average higher purely by taking all the doctors and their higher salaries (and therefore higher pensions) into account. Also, LGPS seem to pay more by equivalent grades/job weight than most CS departments.

Actual Civil Servants always get a bum deal when being spoken about, as most people forget the majority are pretty low paid (not much more than min wage) for a heck of a lot of responsibility, at least in the Departments I worked in or with.

hugheskevi

GunJack said:

Universidad said:

GunJack said:

Universidad said:

 the average public sector pension (which I think was more in the realm of 15K per year).

I think from memory it was more like £8-9k in the last few years..

I must admit that was a bit finger in the air, and 15K is too high an estimate.

But it's definitely higher than 8-9K by now - the mean public sector pension in payment in 2009 was about 8000.

Public sector pensions track (or in some cases exceed) CPI, so assuming another year of high inflation, it seems likely the average will be over 13K within 12 months, ignoring other potential changes (such as changes in demographics, remedies and changes to schemes, and the effect of salary supression on pension accrual).

I was talking purely Civil Service, not sure about how including the rest of the "Public Sector" may or may not skew that figure, e.g. NHS pensions will probably make the average higher purely by taking all the doctors and their higher salaries (and therefore higher pensions) into account. Also, LGPS seem to pay more by equivalent grades/job weight than most CS departments.

Actual Civil Servants always get a bum deal when being spoken about, as most people forget the majority are pretty low paid (not much more than min wage) for a heck of a lot of responsibility, at least in the Departments I worked in or with.

The latest stats for Civil Service show that as at 31 March 2022 the average (mean) pension in payment was:

Males - £11,800 p/a (excludes spouses and dependents)
Females - £6,600 p/a
Spouses and Dependents - £4,800 p/a
Overall - £8,600 p/a

Note this does not take account of the McCloud judgment, although that is unlikely to make a meaningful difference to the averages above, perhaps just increase them very slightly. The 10.1% increase for 2023 uprating is likely to have a much larger effect.

But average pension is payment is a meaningless metric, given it lumps in people who worked a lifetime in the Civil Service with those who just did a couple of years and left, and is almost entirely based on payments from pension schemes which are now closed to new accrual (aside from legacy final salary link and pre-existing voluntary payment contracts).

Universidad

hugheskevi said:

 average pension is payment is a meaningless metric,

In isolation I'd agree, but the massive real terms drop in average civil service pension in payment over a single decade hints at something worth looking into.

Is it down to higher turnover? Salary suppression? Closure of the older schemes? I don't know, but something(s) changed.

hugheskevi

Universidad said:

hugheskevi said:

 average pension is payment is a meaningless metric,

In isolation I'd agree, but the massive real terms drop in average civil service pension in payment over a single decade hints at something worth looking into.

Is it down to higher turnover? Salary suppression? Closure of the older schemes? I don't know, but something(s) changed.

In 2010 the average Civil Service pension in payment was £6,199 (source: Hutton Interim Report, page 28). Adjusting for CPI inflation up to March 2022 increases this to £8,814. This compares to the actual average payment in 2022 of £8,600 so I don't think there has been a big fall in average payment in real terms?

During that period there has been pay restraint, but that only affects the value of past service in the Classic pension scheme as all the other schemes have excellent inflation proofing, with the other final salary scheme - Premium - protecting highest salary over a 13 year period. However, most retiring since 2010 will be Classic members and so their pension will have been affected real terms pay reductions unless they were promoted or took action to protect their highest final salary (opt-out or switch to Partnership). I think this would probably be the second most significant influence on average pension in payment.

In terms of the number of workers, the Civil Service saw a decline in the workforce from 2010 and 2016 as a result of recruitment freezes, which then went into reverse with Brexit to return to broadly where it was previously. This churn will over time may depress the average due to the higher number of pension entitlements, but probably had little impact on average pension in payment.

Closure of older schemes will have had little impact, as due to protection relatively few will have had service in alpha, and of those who do it is actually probably in their favour, but in any case small relative to their much larger legacy scheme benefits.

The shift from RPI to CPI probably had the biggest effect, as many will be present both in 2010 and 2022 datasets (ie did not die). Between March 2010 and March 2022 CPI increased by 32% compared to RPI which increased by 46.6%, so pensions in payment are 10% lower than they otherwise would have been for those who were retired in 2010 and still alive in 2022.