Civil Service Alpha Scheme: EPA, AP and NPA

m1098403

Hello, new member here and first post - I have a question about the Civil Service Alpha scheme I haven’t seen answered anywhere else.

I’m currently 39 (male) and have been in the scheme for 5 years. I plan to stay in the Civil Service and want to retire at 60-65.

Section 01A of the Alpha guide states: “You can take your alpha benefits from your alpha Normal Pension Age (NPA) without any early payment reduction. In alpha, NPA is the later of age 65, or your State Pension age”. And, “As your alpha scheme NPA is linked to your SPA, if your SPA changes your NPA will change too”.

I understand Normal Pension Age for the scheme is tied to State Pension Age. Currently for myself this is 68, but I suspect it will be 70 (or possibly higher!) by the time I retire. I am currently relying on my Civil Service Alpha pension for retirement income, with some additional savings, and would view any State Pension or inheritance a “bonus”. Current forecasts on what Civil Service Pension I should receive are comfortable.

To help with taking my pension early I plan on starting to pay for EPA-3 to bring this down from 68 to 65, and then added pension to help mitigate the impacts of taking my pension any sooner than that (i.e. 60-65).

My question is: What happens if the state pension significantly rises, say to 72 or 75? This could significantly impact my plans to retire at 60-65 as my NPA would also rise to 72 or 75. Might we see a revision to the Civil Service Pension scheme rules? If not could we see strike action or similar? Further, what would happen if the State Pension is abolished entirely? Default to the NPA of 65, or some other calculation?

I know there has to be an element of trust in pension schemes, and the Civil Service schemes are still about as good as it gets. But with recent news about State Pension Age and looking at how testing this may be for future governments, given the Alpha scheme Normal Pension Age is directly tied to State Pension Age… I’m nervous.

So any thoughts, advice, information? Should I consider options other than EPA and Added Pension if I am that concerned about potential rises to NPA?

Kind regards,

Anxious Millennial

BoGoF

The apathy amongst Civil Service members these days would mean there would be little appetite for any fight.

In terms of most of your other questions who knows what the answers will be. Any increase to the state pension age will be a political hot potato that nobody will want to grasp.

hugheskevi

m1098403 said:

My question is: What happens if the state pension significantly rises, say to 72 or 75? This could significantly impact my plans to retire at 60-65 as my NPA would also rise to 72 or 75. Might we see a revision to the Civil Service Pension scheme rules? If not could we see strike action or similar? Further, what would happen if the State Pension is abolished entirely? Default to the NPA of 65, or some other calculation?

I know there has to be an element of trust in pension schemes, and the Civil Service schemes are still about as good as it gets. But with recent news about State Pension Age and looking at how testing this may be for future governments, given the Alpha scheme Normal Pension Age is directly tied to State Pension Age… I’m nervous.

So any thoughts, advice, information? Should I consider options other than EPA and Added Pension if I am that concerned about potential rises to NPA?

If the State Pension rises significantly your alpha NPA/EPA rises too. There is no reason to expect a revision to the alpha rules in such a circumstance - if policymakers had wished to put in an actuarial longevity adjustment factor to automatically adjust for changing life expectancy (as used in some private sector schemes) then they could have done so. But they chose an explicit link to State Pension. In recent reviews of State Pension age, changes have been driven by the Govt. view of how long someone should spend in retirement rather than longevity changes, but there has been no suggestion of delinking public service pension ages from State Pension age.

Most of your post is speculation about what could happen in a theoretical future, so is difficult to answer with anything other than speculation.

Generally, if a reference point ceases to exist, then the most reasonable replacement is chosen. So perhaps the State Pension at date of abolition would continue to be used, perhaps with a longevity adjustment factor.

The only vaguely plausible large increase to State Pension that could be considered at all possible would likely be something like amending the headline age to a much higher age and amount, but permitting a reduced State Pension from an earlier age. For example, you can get £300 at age 75 or £200 from age 70. Then you could argue State Pension age is 75.

It is perhaps worth noting that the population gets very vocal about changes to State Pension age (albeit not to French standards), and any significant changes would also agitate the public sector (not just Civil Service, but NHS, LGPS, Teachers, and others too) due to the normal pension age link. The combination would represent a very strong combined lobby group.

m1098403 said:

But with recent news about State Pension Age and looking at how testing this may be for future governments, given the Alpha scheme Normal Pension Age is directly tied to State Pension Age… I’m nervous.

What news? A think-tank mentioned things about age 71, but that is par for the course. You will see several of these sort of things every year.

Neither party has made any recent announcements on State Pension age of any significance. The most recent development was the Conservative Party delaying any decision about bringing forward an increase to age 68 until after the Election.

m1098403 said:

So any thoughts, advice, information? Should I consider options other than EPA and Added Pension if I am that concerned about potential rises to NPA?

It rather depends on how concerned you are. If your question was should I invest in oil if I am concerned about the impact of future green taxes that would indicate that perhaps that type of investment may not be suitable for you.

Note that if State Pension age does increase, if you have purchased Added Pension then you lose some of the value of that Added Pension. If you have purchased EPA you still get the value of the purchase.

Universidad

A rise in the state pension age is the most significant risk to the value of your Alpha pension, IMO... because  it's a way to reduce what you get, that's already baked into the rules.
That said, it's not a mechanism that can be applied narrowly, so there's no sense in which it could be targeted to civil servants. 
Every time the state pension rises by a year, this devalues your entire (Alpha) pension by roughly 5%. 
In that sense any approach that raises the value of your pension will help. Added pension, EPA, or a DC pot (AVCs or private pension) to help bridge the gap to SPA are all totally valid options. Any "right" answer is going to depend on your circumstances. 
EPA is better if you might otherwise breach your Annual Allowance, for example.
A DC pot is more flexible if you want to take additional income for a period of time rather than your whole retirement. 
Ultimately, if the SPA does rise to 75 you will probably still be able to retire from 65, just with a significantly reduced pension. Practically I suspect most people would have to work extra years in order to have enough to live on. 
But I also think it's unlikely the SPA will rise another 7 years. 

Emmia

m1098403 said:

Hello, new member here and first post - I have a question about the Civil Service Alpha scheme I haven’t seen answered anywhere else.

I’m currently 39 (male) and have been in the scheme for 5 years. I plan to stay in the Civil Service and want to retire at 60-65.

Section 01A of the Alpha guide states: “You can take your alpha benefits from your alpha Normal Pension Age (NPA) without any early payment reduction. In alpha, NPA is the later of age 65, or your State Pension age”. And, “As your alpha scheme NPA is linked to your SPA, if your SPA changes your NPA will change too”.

I understand Normal Pension Age for the scheme is tied to State Pension Age. Currently for myself this is 68, but I suspect it will be 70 (or possibly higher!) by the time I retire. I am currently relying on my Civil Service Alpha pension for retirement income, with some additional savings, and would view any State Pension or inheritance a “bonus”. Current forecasts on what Civil Service Pension I should receive are comfortable.

To help with taking my pension early I plan on starting to pay for EPA-3 to bring this down from 68 to 65, and then added pension to help mitigate the impacts of taking my pension any sooner than that (i.e. 60-65).

My question is: What happens if the state pension significantly rises, say to 72 or 75? This could significantly impact my plans to retire at 60-65 as my NPA would also rise to 72 or 75. Might we see a revision to the Civil Service Pension scheme rules? If not could we see strike action or similar? Further, what would happen if the State Pension is abolished entirely? Default to the NPA of 65, or some other calculation?

I know there has to be an element of trust in pension schemes, and the Civil Service schemes are still about as good as it gets. But with recent news about State Pension Age and looking at how testing this may be for future governments, given the Alpha scheme Normal Pension Age is directly tied to State Pension Age… I’m nervous.

So any thoughts, advice, information? Should I consider options other than EPA and Added Pension if I am that concerned about potential rises to NPA?

Kind regards,

Anxious Millennial

I'd look to save into a S&S ISA or a separate personal pension to bridge that gap between when you want to retire and when the CS & State pension kicks in.

m1098403

Hi All - thanks for your useful comments. It's somewhat settled my nerves regarding NPA and State Pension Age link and what may or may not happen with that.

I think for me, I will continue with EPA and AP - but will also look into DC Schemes/LISAs/ISAs and generally saving more.

michaels

Hijacking the thread a bit but perhaps this is another reason towards taking my alpha pension as early as possible with the reduction as then I lock in the current retirement age.