Advantages of Premium vs Alpha civil service pension in retirement

MR_666

The wife has put in for early retirement (2 years before the NPA for Premium and 9 for Alpha so will be actuary reduced) and has received a pension benefits statement from MyCSP.
Depending on the McCloud remedy, she will have either 31 years in Premium and 2 years in Alpha (Option 'A') or 24 years in Premium and 9 years in Alpha (Option 'B').
The difference between the two options is around £100 per annum (in favour of Option 'A') with a £700 per annum difference in the Partner Pension (with Option 'B').
As the partner pension would only be a "nice to have", it probably makes more sense to go with the slightly higher Option 'A'. Is there any advantage to having more years in Alpha once in retirement that would steer one towards Option 'B'?

Dazed_and_C0nfused

What is the Partner Pension?

Do you mean a survivor pension payable to you on her death?

Does she particularly need to take the Alpha element now?

Yorkie1

As mentioned by D_and_C, is your wife aware that she can take the two parts of the pension at different times? 

MR_666

Dazed_and_C0nfused said:

What is the Partner Pension?

Do you mean a survivor pension payable to you on her death?

Does she particularly need to take the Alpha element now?

Yes, it's described as "Total widow(er)'s, partners or civil partners pension' which is the survivors pension AIUI.

We were aware we could defer Alpha to 67 and therefore remove the ~45% actuary reduction. Don't desperately need to claim it, but it'd make things a bit easier if we did.

If I assume a linear 3% inflation rate, I think by 84 she would be around £10k better off (in total over the period, not per annum) if she deferred taking Alpha. Depends on what inflation is like - 5% increases that to £17k and 2% is about £6k.

Worthwhile sums of money but with a fair amount of unknown about life expectancy and inflation over the period.

MR_666

Yorkie1 said:

As mentioned by D_and_C, is your wife aware that she can take the two parts of the pension at different times? 

Yes, and I've tried to calculate what deferring means in my post in response to their question.

Bravepants

For what it's worth, I'm 56 (and a half), I've applied to take both Alpha and Premium early, having been boosted by recent high CPI figures and a favourable 13 year average calculation. I have not yet received my first payment.

My Option B works out at £309 less gross pension per annum than Option A, while the partner's pension is quoted as £1170 higher than Option A.

I chose Option B because I'm 4 years older than my partner and, in general, women have a longer lifespan than men, and I wanted to make sure she gets the maximum she can IF I cark it before her.  

I guess it's a gamble, but for me the £309 gross difference is relatively small compared to the annual pension, and by the time State Pension kicks in even smaller.

Your arguments might be similar but reversed given that you (the male) are the partner.

I'm expecting a re-quote as there have been some months delay since my claim at the end of June but I don't expect the relative figures to be much different.

hugheskevi

If partner pension is a concern, then considering allocation would be sensible. Allocation exchanges pension for enhanced survivor benefits. 

Details and factors are at this link.

Another option is to slightly delay commencing pension, as the pension increases but survivor benefits are the same as they are unaffected by date of commencement, so that can be a way to equalise benefits between spouses.

MR_666

Thanks for the insight everyone.

Partner/survivor pension isn't a concern - I have my own DC pension which I'm forecasting to be a reasonable amount, so the wife's pension would be an added bonus (if I outlived her).

I've tidied up my forecast spreadsheet a bit and taking both Premium & Alpha at retirement under Option A provides the highest total return until my wife is 79 years old. It's never the lowest total return option.

Taking Premium at retirement and deferring Alpha under Option B provides the highest total return once she turns 80. It's the worst return until then - especially in the early years. For example, at 67 it's about £52k less than taking Premium & Alpha at retirement under Option A.

Doesn't seem to make a lot of sense to have less when you have more certainty of needing it (younger) versus the potential of never reaching the point where the crossover in total return happens (older). In the absence of any other reasons why you'd want more Alpha in retirement, we're leaning towards taking both Premium & Alpha now under Option A.