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Alpha Added pension with actuarial reduction - how to calculate

IceCreamCone10
Posts: 11 Forumite

Hi, I am wondering how Alpha added pension is uplifted until it is taken early at say 60 (scheme age/SPA 67). I am not after exact figures but just the basic way of working it out.
Eg.
600 added pension per month from payroll (7200pa) in 2025-26 with MyCSP AP calculator giving 500.
Assuming CPI uplift is 2% every year between 2026 - 2030 inclusive, is 2% added to the 500 from 2026, then 2% is added each year thereafter until 2030 (so compounded) when it is taken 7 years early. The figure at that point in time is x.
Then assuming an annual 5% actuarial reduction, is it x minus an annual 5% for 7 years and the result is the added pension you get at 60?
Thanks.
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Comments
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£600 added pension per month from payroll (£7,200pa) in 2025-26 with MyCSP AP calculator giving £500.
The actuarial factors are also reviewed from time to time (about every 3-5 years), and the cost may change as a result of that, becoming either cheaper or more expensive. The key thing that determines the change is any change to the discount rate. The discount rate is set based on expected future GDP growth, and is currently set at CPI+1.7%.
Yes, noting that the assumed 2% uplift in April 2026 would be applied in full to the £500 of Added Pension accrued in 2025/26.Assuming CPI uplift is 2% every year between 2026 - 2030 inclusive, is 2% added to the 500 from 2026, then 2% is added each year thereafter until 2030 (so compounded) when it is taken 7 years early.Then assuming an annual 5% actuarial reduction, is it x minus an annual 5% for 7 years and the result is the added pension you get at 60?
There is a a single factor applied to the accrued pension payable from Normal Pension age to calculate the actuarially reduced amount, which in the case of this example would be the reduction for taking alpha with a Normal Pension age of 67 a total of 7 years prior to Normal Pension age.
The factors are published in this spreadsheet at sheet x-404 for this example, and the reduction would be 30%
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Fab -many thanks.0
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The 2% (or whatever) annual increment is equal to CPI inflation so easier just to work in real terms, you are getting £500pa of current spending power value for your contribution.I think....0
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