Deferred Alpha Pension to LGPS Transfer?

Mokkadoodledo

Hi all,

I am currently trying to decide if I should transfer my deferred Alpha Pension across to LGPS and just want to check I am not missing anything obvious I ought to consider…

As a bit of background, I am 53 and I have a previous LGPS pension from 2000 - 2019 when became deferred when I was Tuped across into the Civil Service.  I have now returned to local government and I am choosing to link my old deferred LGPS pension which contains a final salary element to my new LGPS pension (as my new role is better paid). I am hoping to be able to retire (or partially retire) around age 62, and to this end, am currently also paying into a Vanguard targetted retirement plan (£300 per month) which I only started April last year.

Whilst I was in the Civil Service, I transferred an old private pension in, and also purchased added pension (for self only-no dependants).  

The total of my deferred Alpha pension benefits is £6880 (of which £2499 is added pension).

I now have my transfer values through and because my added pension in Alpha was for ‘self-only’, it has been calculated on a non-club basis and so the transfer value for that part is £2235 if transferred to LGPS (£264 less than in Alpha)

However, the overall transfer total value I have been given by LGPS is £7120, so despite losing part of the added pension, the total transfer value still comes out £240 higher than Alpha - which was a bit unexpected, but I have been told the figures are correct.

On the face of it, it looks like a no brainer to transfer - is there anything I am missing though?  Or are there advantages to not putting all my eggs into one basket (so to speak)

The only thing I can think of is if I leave my Alpha deferred - CPI annual increases apply, which may be a higher % than those of pay awards, so may overtake the LGPS valuation in time perhaps?

Any help/advice would be much appreciated🙏

hugheskevi

I have a previous LGPS pension from 2000 - 2019 when became deferred when I was Tuped across into the Civil Service.  🙏

So you are in scope of the 2015 Remedy. Hence you will have a choice of legacy or reform scheme for your 2019-2022 Civil Service scheme. It would be sensible to check that MyCSP are aware of your protection status given you only joined in 2019 and were not a protected member.

I am hoping to be able to retire (or partially retire) around age 62

If you were to transfer back would the transferred benefits be in scope of abatement? If left at the Civil Service the pension could be commenced in full with no abatement (subject to any unusual rules that may affect you, such as inter-service abatement).

I now have my transfer values through and because my added pension in Alpha was for ‘self-only’, it has been calculated on a non-club basis and so the transfer value for that part is £2235 if transferred to LGPS (£264 less than in Alpha)

However, the overall transfer total value I have been given by LGPS is £7120, so despite losing part of the added pension, the total transfer value still comes out £240 higher than Alpha - which was a bit unexpected, but I have been told the figures are correct.

On what basis is the main scheme pension transferring? Club? If so, it sounds like it has been adjusted slightly to account for differences between LGPS and alpha (eg, things like different survivor benefits, death benefits, etc).

On the face of it, it looks like a no brainer to transfer - is there anything I am missing though?  Or are there advantages to not putting all my eggs into one basket (so to speak)

What is the reason for the adjustment, and do you value whatever the difference in benefit structure causing the adjustment?

I think understanding how the 2015 Remedy will affect the transfer would be helpful to explore further.

The only thing I can think of is if I leave my Alpha deferred - CPI annual increases apply, which may be a higher % than those of pay awards, so may overtake the LGPS valuation in time perhaps?

The assumption would be that salaries increase faster than prices over time.

But if this is a Club transfer with no 2015 Remedy applied then wouldn't the transfer-in be into the LGPS career average part? What exactly is the credit you have been offered - it sounds like a CARE credit rather than a service credit in a final salary scheme?

amanda1024

hugheskevi said:

The assumption would be that salaries increase faster than prices over time.

For the civil service at least, this hasn’t been true for over a decade (https://www.instituteforgovernment.org.uk/explainer/civil-service-pay), so isn’t necessarily a realistic assumption going forwards either. I understood that local government pay had been subject to a similar series of freezes and caps in recent years too. If this is going to change in coming years, this is the first I’m hearing!

hugheskevi

amanda1024 said:

hugheskevi said:

The assumption would be that salaries increase faster than prices over time.

For the civil service at least, this hasn’t been true for over a decade (https://www.instituteforgovernment.org.uk/explainer/civil-service-pay), so isn’t necessarily a realistic assumption going forwards either. I understood that local government pay had been subject to a similar series of freezes and caps in recent years too. If this is going to change in coming years, this is the first I’m hearing!

Whether or not it is a realistic assumption or not is irrelevant, it is the assumption used by the schemes to price the transfers. The assumptions are set out in HM Treasury Directions at Directions 15, 17, and 18 and were published in August 2023. They are:

April 2024 - Prices 4.1%, earnings 4.7%, public sector earnings 2.5%
April 2025 - Prices 0.6%, earnings 1.6%, public sector earnings 1.6%
April 2026 - Prices 0.0%, earnings 1.7%, public sector earnings 1.6%
April 2027 - Prices 0.8%, earnings 1.9%. public sector earnings 1.9%
April 2028 - Prices 1.7%, earnings 2.5%, public sector earnings 2.7%
Thereafter - Prices 2.0%, earnings 3.8%, public sector earnings 3.8%

Mokkadoodledo

Thanks Hugheskevi, you have raised some important points I definitely hadn’t considered…

hugheskevi said:

I have a previous LGPS pension from 2000 - 2019 when became deferred when I was Tuped across into the Civil Service.  

So you are in scope of the 2015 Remedy. Hence you will have a choice of legacy or reform scheme for your 2019-2022 Civil Service scheme. It would be sensible to check that MyCSP are aware of your protection status given you only joined in 2019 and were not a protected member.

When I first joined the Alpha scheme, I asked for a transfer quote and was considering transferring my LGPS pension across into the civil service pension scheme, but it all got held up due to McCloud, but I did receive a valuation from MyCSP for the value of my LGPS pension benefits if transferred  - so they should be aware of my protection status - but if they weren’t for some reason, would/could this affect the valuation they have just given me for my Alpha benefits?   I will try and read up more on how the 2015 remedy as I don’t think I fully understand this at the moment.  

Ah, I wasn’t aware of abatement - now I have read a bit about this via your link, it is definitely giving me pause for thought on transferring. I just tried googling ‘inter-service abatement’ to no avail - would this be circumstances where abatement would apply to a deferred Alpha pension even if currently an active member of LGPS (in my situation)? 

Yes, the main part of my Alpha pension is Club basis which is why I was expecting that part at least, to be very similar value to the amount estimated by LGPS if transferred (as both CARE schemes) - but it does sound like there have been some adjustments made, causing the difference - I have queried why the overall total valuation in LGPS is higher, and LGPS gave me a general reason as follows: ‘Club transfers and Non club transfers are calculated differently and use different actuarial factors. This will be why the benefits from your Alpha CORE will increase if transferred, but the benefits from the added pension will decrease’

I think understanding how the 2015 Remedy will affect the transfer would be helpful to explore further.

The only thing I can think of is if I leave my Alpha deferred - CPI annual increases apply, which may be a higher % than those of pay awards, so may overtake the LGPS valuation in time perhaps?

The assumption would be that salaries increase faster than prices over time.

But if this is a Club transfer with no 2015 Remedy applied then wouldn't the transfer-in be into the LGPS career average part? What exactly is the credit you have been offered - it sounds like a CARE credit rather than a service credit in a final salary scheme?

Yes my understanding is it will be a CARE credit from Alpha and the transfer-in will be into the LGPS career average part - so would that mean that the 2015 Remedy doesn’t need to be taken into account in this case?

hugheskevi said:

amanda1024 said:

hugheskevi said:

The assumption would be that salaries increase faster than prices over time.

For the civil service at least, this hasn’t been true for over a decade (https://www.instituteforgovernment.org.uk/explainer/civil-service-pay), so isn’t necessarily a realistic assumption going forwards either. I understood that local government pay had been subject to a similar series of freezes and caps in recent years too. If this is going to change in coming years, this is the first I’m hearing!

Whether or not it is a realistic assumption or not is irrelevant, it is the assumption used by the schemes to price the transfers. The assumptions are set out in HM Treasury Directions at Directions 15, 17, and 18 and were published in August 2023. They are:

April 2024 - Prices 4.1%, earnings 4.7%, public sector earnings 2.5%
April 2025 - Prices 0.6%, earnings 1.6%, public sector earnings 1.6%
April 2026 - Prices 0.0%, earnings 1.7%, public sector earnings 1.6%
April 2027 - Prices 0.8%, earnings 1.9%. public sector earnings 1.9%
April 2028 - Prices 1.7%, earnings 2.5%, public sector earnings 2.7%
Thereafter - Prices 2.0%, earnings 3.8%, public sector earnings 3.8%

Thank you also for this detailed info re poss CPI vs salary increases- I was unaware of these calculations and like amanda1024, thought the CPI rises would be a better bet than salary rises, which have been pitiful for many years (uptil very recently, due to the rises in inflation).

Hmm, I thought I understood my pension reasonably well, but it looks like I have some sizeable and important gaps in my knowledge which could affect my decision, that I need to try and get my head round asap

hugheskevi

Mokkadoodledo said:
When I first joined the Alpha scheme, I asked for a transfer quote and was considering transferring my LGPS pension across into the civil service pension scheme, but it all got held up due to McCloud, but I did receive a valuation from MyCSP for the value of my LGPS pension benefits if transferred  - so they should be aware of my protection status - but if they weren’t for some reason, would/could this affect the valuation they have just given me for my Alpha benefits?   I will try and read up more on how the 2015 remedy as I don’t think I fully understand this at the moment.   

I'd say it would be 50/50 on whether your 2015 Remedy status is correctly recorded, definitely check that with MyCSP.

If they are not aware it won't affect value for alpha benefits, but it will mean you could miss out on the option of a different set of benefits. Perhaps they won't be as valuable so it wouldn't matter. It would probably all come to light at retirement anyway so not matter, but it would then probably delay the retirement process a bit so best to get everything in the best possible order now.

Mokkadoodledo said:

I just tried googling ‘inter-service abatement’ to no avail - would this be circumstances where abatement would apply to a deferred Alpha pension even if currently an active member of LGPS (in my situation)? 

Don't worry about inter-service abatement, it won't apply to you. It is very rare cases where an individual changes employment and gets a role solely due to skills built up in their existing role, so if it were to apply it would probably be senior execs or at the very least some sort of very specific technical expert.

Mokkadoodledo said:

Yes, the main part of my Alpha pension is Club basis which is why I was expecting that part at least, to be very similar value to the amount estimated by LGPS if transferred (as both CARE schemes) - but it does sound like there have been some adjustments made, causing the difference - I have queried why the overall total valuation in LGPS is higher, and LGPS gave me a general reason as follows: ‘Club transfers and Non club transfers are calculated differently and use different actuarial factors. This will be why the benefits from your Alpha CORE will increase if transferred, but the benefits from the added pension will decrease’

Ah yes, the 'actuaries work in mysterious ways' response

Mokkadoodledo said:

Yes my understanding is it will be a CARE credit from Alpha and the transfer-in will be into the LGPS career average part - so would that mean that the 2015 Remedy doesn’t need to be taken into account in this case?

Sort of. The 2015 Remedy means you basically have two separate options available to you, which you will choose from at retirement. One option sees you having the reformed CARE scheme benefits from 2015 - this is what you have and what all the quotes are based on. The other strand saw you remaining in the LGPS final salary scheme after 2015. In that scenario you would have transferred into a different Civil Service scheme. It is that strand which you are missing quotes for, and which may or may not be better than what you have. None of the member data has been transferred to enable that quote anyway, but in due course it will all catch-up.

Thank you also for this detailed info re poss CPI vs salary increases- I was unaware of these calculations and like amanda1024, thought the CPI rises would be a better bet than salary rises, which have been pitiful for many years (uptil very recently, due to the rises in inflation).

Hmm, I thought I understood my pension reasonably well, but it looks like I have some sizeable and important gaps in my knowledge which could affect my decision, that I need to try and get my head round asap

Don't put any credibility on the assumptions, they have next to no chance of coming true anyway, they just form the basis for calculation of the actuarial factors governing transfers. For many years the assumption has been that wages will increase above prices within a few years...

Hmm, I thought I understood my pension reasonably well, but it looks like I have some sizeable and important gaps in my knowledge which could affect my decision, that I need to try and get my head round asap

This is quite techy stuff, unfortunately, transfers within the 2015 Remedy period (2015-2022) makes an already quite complex area very difficult, with the need for multiple data transfers between LGPS and Civil Service. It is easy to get a bit overwhelmed by all the detail but as long as you understand the principles of what is going on and what might affect you then you shouldn't go too far wrong even if you don't understand every nuance.

Mokkadoodledo

hugheskevi said:

I'd say it would be 50/50 on whether your 2015 Remedy status is correctly recorded, definitely check that with MyCSP.

If they are not aware it won't affect value for alpha benefits, but it will mean you could miss out on the option of a different set of benefits. Perhaps they won't be as valuable so it wouldn't matter. It would probably all come to light at retirement anyway so not matter, but it would then probably delay the retirement process a bit so best to get everything in the best possible order now.

This is quite techy stuff, unfortunately, transfers within the 2015 Remedy period (2015-2022) makes an already quite complex area very difficult, with the need for multiple data transfers between LGPS and Civil Service. It is easy to get a bit overwhelmed by all the detail but as long as you understand the principles of what is going on and what might affect you then you shouldn't go too far wrong even if you don't understand every nuance.

I have emailed MyCSP today to make sure they have correctly recorded my 2015 remedy status to avoid possible delays down the line. Thanks again Hugheskevi, for all your great advice - it is much appreciated.

michaels

Are then any downsides post finishing at the CS but before drawing any pension to getting a (short term) job that provides access to LGPS then transferring alpha and an external sipp into LGPS (DB and AVC respectively) in order to take advantage of the special TFLS treatment?  Could be worth a few 10s of thousands for say a few weeks as an exam invigilator?