Alpha Pension - AVC''S or Additional Pension?

TFH

I joined the Civil Service in Dec 2020 at age 47 with no previous pension and was enrolled in the Alpha Pension scheme. I opted to pay an extra £50 in Additional Voluntary Contributions to help build it up due to the late start but have since found out that this doesn't increase my pension as such, but is a completely separate investment with Legal and General (which I would not have chosen). Should I swap to purchasing additional pension? What is likely to be the best way to boost my pension income? Can anyone explain pros and cons of the options? Many Thanks 

housebuyer143

If it's any consolation £50 a month into additional years, would only buy you an extra £60 or £70 a year so you haven't lost much and in fact you have all that money in AVCs. 

MSE_ForumTeam5

We've moved this to the Pensions board

r6mile

I am personally in the CS AVC scheme, as I preferred to have the flexibility of a defined contribution pension alongside my Alpha defined benefit pension. If you have no previous pension, then I think the CS AVC scheme is still a good option. If you consider that when you retire you will have your Alpha pension, and your state pension - both of which will give you a guarantee monthly income - so a DC pot that you can access more flexibly (to perhaps boost your income in the early years of retirement, take some extra to pay off debts/mortgage etc, etc.) might help.

As others have said you should be realistic about the impact that £50 a month will have (either via CS AVS or Added Pension) - but any amount you put in will obviously help.

Have you looked at the different investment options in the CS AVC scheme? The default Multi-Asset Fund 3 is decent and well diversified but is quite cautious at only 40% equities - so depending on your risk appetite you may want to include more equities into the mix.

NedS

As always, which is the right option for you will depend on many factors.

If you started in the CS at age 47, and stay until retirement, you have the scope to be in Alpha for 20plus years. As Alpha accrues at 2.32% of your pensionable salary (inflation-linked), it is fairly easy to work out how much your pension may be when you retire.

The main advantage of an alpha pension is it is guaranteed (and inflation-linked), so if you want more guaranteed income upon retirement than another potential 20 years service will provide, buying added pension seems like a good choice.

The downsides of Alpha are a lack of flexibility, should for example you want to retire early or you will require a tax free lump sum upon retirement. Having a separate pension pot provides some flexibility at the cost of more uncertainty.

The answer may be a little of both.

Albermarle

The answer may be a little of both.

Although with such a small contribution ( in pension terms), splitting it will spread it even more thinly.

NedS

Albermarle said:

The answer may be a little of both.

Although with such a small contribution ( in pension terms), splitting it will spread it even more thinly.

Indeed, I was tempted to suggest £50/month (or more) into each, not splitting the existing £50/month.

I appreciate not everyone currently has the scope to make large additional pension contributions - indeed a recent study has shown an alarming number of people currently opting out of (NHS) DB pension schemes as they cannot afford the monthly deductions