Transfer in to alpha, coming from a workplace DC pension

System

This discussion was created from comments split from: Transfer DC Pension into Alpha Civil Service?.

MartinSpoon

I have a question that's a slight tangent, if the knowledgable people can help!

I've received a quote for a transfer in to alpha, coming from a workplace DC pension (a fairly straighforward Standard Life Flexible Retirement Plan). The transfer value was about £85k generating about £7k per year pension in alpha.

My question is what is my risk if I were to leave the civil service before 2 years (I am currently on a 1 year fixed term post, which I hope will extend, but I can't guarentee it). The guidance on whether I automatically qualify for a preserved pension, or whether my transfer in earns me any service credits, is really unclear. I can see references to preserved benefits if I transfer in a 'personal pension' but I can't find anything on a workplace DC scheme.

I've just phoned them, and had a maddening experience. The person I spoke didn't seem to think I would qualify for any preserved benefits or service credits, and if I left with less than 2 years I'd get a refund, minus employer contributions, INCLUDING contributions from my previous employer! But surely that can't be right?? That would mean I was talking a HUGE risk on losing about 50% of my previous pension - unless I transfer it again, but even then I have no idea what their transfer value back out will be, and apparently I only have 3 months to do so.

I know this forum can't give me financial advice, but any help before would be appreciated!

michaels

AS I understand it, transfer in to Alpha means that the min 2 year period no longer applies for all contributions.

hugheskevi

Agree with Michaels, transfer in of any pension type triggers preservation (ie no mandatory refund or transfer if leave within 2 years).

As an aside, it is best to avoid telephoning with anything that isn't utterly routine, do it by email. Remember you may well be talking to a new recruit who knew nothing at all about pensions or the pension scheme until they were recruited, did a short training course (2 or 3 weeks) then are let loose on the phones 

Universidad

hugheskevi said:

Agree with Michaels, transfer in of any pension type triggers preservation (ie no mandatory refund or transfer if leave within 2 years).

AFAIK it's slightly more nuanced than that. Transfer in of any private pension into CS Alpha immediately vests the pension.

However, transfer in of a workplace pension basically reduces the vesting period by the amount of time you contributed to that workplace pension.

In my case I transferred in a workplace pension that had ~6 months of contributions, which reduced my overall vesting period to 18 months from 2 years.

hugheskevi

Universidad said:

hugheskevi said:

Agree with Michaels, transfer in of any pension type triggers preservation (ie no mandatory refund or transfer if leave within 2 years).

AFAIK it's slightly more nuanced than that. Transfer in of any private pension into CS Alpha immediately vests the pension.

However, transfer in of a workplace pension basically reduces the vesting period by the amount of time you contributed to that workplace pension.

In my case I transferred in a workplace pension that had ~6 months of contributions, which reduced my overall vesting period to 18 months from 2 years.

Interesting. I agree that the transfer-in of a personal pension set up entirely independently of a workplace pension would immediately vest the pension.

I looked at the Scheme Rules. Occupational pensions are indeed treated differently as you say, and are defined as in Pension Schemes Act 1993:

"occupational pension scheme” means a pension scheme—

(a) that—

(i) for the purpose of providing benefits to, or in respect of, people with service in employments of a description, or

(ii) for that purpose and also for the purpose of providing benefits to, or in respect of, other people,

is established by, or by persons who include, a person to whom subsection (2) applies when the scheme is established or (as the case may be) to whom that subsection would have applied when the scheme was established had that subsection then been in force, and

(b) that has its main administration in the United Kingdom or outside the EEA states], or a pension scheme that is prescribed or is of a prescribed description;

which I think could capture Group Personal Pensions, despite those often being defined as personal pensions and/or workplace pensions but not necessarily occupational pensions.

It is not clear (at least not to me) in the rules exactly what happens to vesting, short-service refunds and short-service transfers if a person transfers-in an occupational pension. The rules just seem to exempt transfer-ins of occupational pension in their entirety from the eligibility criteria for these things, rather than clearly saying how they are dealt with. In particular, I couldn't find any reference to the vesting period being reduced, but that would be one reasonable approach. Sometimes in the absence of clear instruction in the scheme rules, scheme managers have to make reasonable interpretations about how administers will apply the scheme rules in practice.

Still, transferring in even a de-minimis amount from a personal pension would trigger preservation, so if in any doubt that would seem to be a prudent thing to do in addition to an 'occupational' pension transfer in order to be sure (even if it required setting up a new SIPP, contributing a small amount and then transferring it).

Universidad

hugheskevi said:

It is not clear (at least not to me) in the rules exactly what happens to vesting, short-service refunds and short-service transfers if a person transfers-in an occupational pension.

I think you get there (for the vesting question!) by a close reading of regulations 60 (2)  and 59 (1)

Reg 60 sets out the entitlement to a full retirement pension

"But if P has not reached normal pension age under this scheme , P is not so entitled unless— (a) P has at least 2 years' qualifying service; (b) a transfer payment otherwise than from another occupational pension scheme has been received by this scheme in relation to P; or"

In this regulation transfers from other occupational schemes are excluded, as you note. But what counts as "qualifying service"? See 59 (1):

1) In these Regulations, “qualifying service” means the total of—
(a) any continuous period of pensionable service under this scheme;
(b) if a transfer payment has been received by this scheme in respect of a member's
accrued rights under another occupational pension scheme, the member's
pensionable service under that scheme; and

In case of doubt about whether the above applies to deferred benefits, note that the interpretations under section 2 states "“qualifying service” has the meaning given in regulation 59;", and that regulation 28 (Meaning of "deferred member") also contains: "P has at least 2 years' qualifying service"

MartinSpoon

Thanks for all the great comments above. I just received an email back from CSP saying:

"I can confirm that where the combined membership in alpha and your former scheme (Standard Life) is more than two years you will be entitled to a preserved award in the event that you leave Civil Service employment with less than two years service."

I'd prefer a bit more detail but I'm going to trust this gives me sufficient "evidence" that I'm covered!