McCloud (again)

george_jetson

OK so I've just received this year's CS pension statement and as expected I've been "rolled back" into my legacy scheme (Classic). 

I've dug out my previous statement and had a play with Excel to see how McCloud will affect me.

In short Alpha pays more but starts later and no lump sum.

Excel tells me that if I retire at 60 with Classic (and take Alpha at 67) the "tipping point" when I'm better off taking Alpha for the remedy period is 75 when I'll be £3,500/year better off. Before 75 Classic for the remedy period wins.

Is it worth it?

In the absence of a crystal ball I'm. wondering if I'll really need the extra money at that age? Surely better to "front load" my income in my 60s and early 70s when I'm more able to make use of it...? Plus I get a full state pension at 67...

I know it's finely balanced but I'd be grateful for others' thoughts, in particular are there other factors I haven't considered?

What would you do? (I'm 57 btw so I won't need to make a decision for a while but would like to think this through now)

hugheskevi

What is the position taking everything at age 60?

You don't want to be taking a lump sum from alpha at a young age, but taking it early isn't prohibitively expensive.

george_jetson

I did consider that option but don’t know how to get a figure for taking Alpha reduced at 60 - is there a “quick and dirty” way of working this out?

hugheskevi

To take alpha at age 60 rather than 67 would give a pension worth 0.687 of the pension value at age 67.

The factors are listed in this document.

Edit - the reduction is 0.7, and the linked document contains out-of-date factors. Latest factors are at this link. 

george_jetson

Thank you! Back to Excel it is then...  

george_jetson

Well that seems to push the "break even" point to past 80 - I will need to double check my figures but it would seem going for Alpha for the remedy period and taking it reduced at 60 is on balance the best option.

The reduction isn't as severe as I anticipated it seems.

Many thanks for your help!

westv

Don't forget that survivor benefits are worse under Alpha compares to Classic.

Silvertabby

george_jetson said:

OK so I've just received this year's CS pension statement and as expected I've been "rolled back" into my legacy scheme (Classic). 

I've dug out my previous statement and had a play with Excel to see how McCloud will affect me.

In short Alpha pays more but starts later and no lump sum.

Excel tells me that if I retire at 60 with Classic (and take Alpha at 67) the "tipping point" when I'm better off taking Alpha for the remedy period is 75 when I'll be £3,500/year better off. Before 75 Classic for the remedy period wins.

Is it worth it?

In the absence of a crystal ball I'm. wondering if I'll really need the extra money at that age? Surely better to "front load" my income in my 60s and early 70s when I'm more able to make use of it...? Plus I get a full state pension at 67...

I know it's finely balanced but I'd be grateful for others' thoughts, in particular are there other factors I haven't considered?

What would you do? (I'm 57 btw so I won't need to make a decision for a while but would like to think this through now)

Don't assume you'll need less income in your  80s +.  We have factored in having to pay for cleaners, gardeners and tradesmen to do the things that we may be unable/unwilling to do ourselves.

george_jetson

westv said:

Don't forget that survivor benefits are worse under Alpha compares to Classic.

Good point but as I've never married I'm looking forward to a refund of my widow's contributions

Silvertabby said:

george_jetson said:

OK so I've just received this year's CS pension statement and as expected I've been "rolled back" into my legacy scheme (Classic). 

I've dug out my previous statement and had a play with Excel to see how McCloud will affect me.

In short Alpha pays more but starts later and no lump sum.

Excel tells me that if I retire at 60 with Classic (and take Alpha at 67) the "tipping point" when I'm better off taking Alpha for the remedy period is 75 when I'll be £3,500/year better off. Before 75 Classic for the remedy period wins.

Is it worth it?

In the absence of a crystal ball I'm. wondering if I'll really need the extra money at that age? Surely better to "front load" my income in my 60s and early 70s when I'm more able to make use of it...? Plus I get a full state pension at 67...

I know it's finely balanced but I'd be grateful for others' thoughts, in particular are there other factors I haven't considered?

What would you do? (I'm 57 btw so I won't need to make a decision for a while but would like to think this through now)

Don't assume you'll need less income in your  80s +.  We have factored in having to pay for cleaners, gardeners and tradesmen to do the things that we may be unable/unwilling to do ourselves.

Yes good point I'm seeing that with my father. And he hasn't cut down on the holidays yet either! 

I think the option suggested by hugheskevi is the best compromise with a "breakeven" point in my 80s. That seems pretty clearcut to me, I was struggling with it at 75...

hugheskevi

westv said:

Don't forget that survivor benefits are worse under Alpha compares to Classic.

Yes and no, it's complicated.

Classic survivor pension is 50% of the classic pension payable from age 60. Alpha survivor pension is 37.5% of alpha pension payable from Normal Pension age. So from first appearance the classic survivor pension does look better.

For a person with a State Pension age of 67, if the alpha pension is taken at age 60, it is reduced to 70% of the amount payable at Normal Pension age due to the actuarial reduction. Taking the pension early does not affect the survivor pension, and taking a lump sum also has no effect on survivor benefits. So, for the person who has taken alpha at age 60 without a lump sum, the survivor pension is a bit under 55% of the alpha pension in payment and so would be higher than classic.

m_c_s

The new 2024 early payment reduction factor for Alpha taken at 60 for a Normal Pension Age (NPA) of 67 is 0.7. So you will get an extra 1.13% if you take Alpha at 60.