CSP - alpha Vs partnership.... And getting a SIPP

WindfallWendy

Sorry, lots going on here.
I'm 47 and rejoining CSP (left in 2006 with 5 years service)

1) alpha Vs partnership - I think alpha seems preferable. I want defined benefits to draw down alongside my other DBs (local government and USS) to have a half decent income.

2) But I want to add in to my pension too, which makes me think partnership (DC) would be better. Additional pension in alpha seems to need me living a very long time, if it's going to be worthwhile and I'm not banking on that to be honest. (It seems like a swizz as an additional £300/month payment in, will lead to and extra £270/year on my pension).

3) If I go for alpha, and DBs, then I could just get a SIPP and put overpayments in there, right? And draw what I want, when I want it. But of course I miss out on the 3% my employer would match if I went with CSP partnership DC scheme.

Anyone else had to make this decision recently? 

To make things even worse, the pensions team at work say that I will only get contributions backdated to my start date if I send them the form back this week (I only received it from them last Thursday (30th Jan) having asked them for it on 7th Jan). So the pressure is on to make a decision quickly!

Emmia

If you go for alpha the employer contribution is much higher than the 3% the employer gives you in partnership.

I'd personally go for Alpha and then additional savings either in a SIPP or in a S&S ISA

https://www.civilservicepensionscheme.org.uk/your-pension/managing-your-pension/contribution-rates/

hugheskevi

Emmia said:

If you go for alpha the employer contribution is much higher than the 3% the employer gives you in partnership.

I'd personally go for Alpha and then additional savings either in a SIPP or in a S&S ISA

https://www.civilservicepensionscheme.org.uk/your-pension/managing-your-pension/contribution-rates/

Alpha will probably be the better choice, but it isn't because of the employer contribution rate.

The employer contribution rate into alpha has very little, if any, relevance to the value of the benefits accrued for an individual member.

The 2020 Civil Service pension scheme Valuation includes the slide below. The 28.97% employer contribution rate includes a 5.1% notional past service deficit payment, which is irrelevant to the value of new pension members are accruing. It also includes administration costs of 0.27%. Taking those out, the average employer contribution rate to newly accruing benefits is 23.6%. That compares to a Partnership contribution rate for a 47 year old of 17.75% (assuming a 3%+ member contribution rate).

 
However, the value of alpha benefits is strongly age-related, with the cost to provide alpha benefits to young members being significantly lower than the cost to provide them for older members. This very significant difference is averaged out into a single employer contribution rate.

Some would also question whether a discount rate of CPI+1.7% is appropriate. A higher discount rate would produce a lower alpha employer contribution rate. Looking at discount rates used in the private sector might suggest that CPI+1.7% is rather low.

Taking all the above into account, the employer contribution rate is an extremely poor proxy for the value of alpha pension accrual. Nonetheless, it is widely abused and 28.97% is often quoted on job adverts despite being extremely misleading.

In the OPs case, being aged 47 alpha is likely to be the better choice, although it isn't entirely clearcut. If the OP was 22 it would be much more complicated. Using additional funds to build up a DC pot is very sensible, combining the flexibility of DC with the security of DB.

Dazed_and_C0nfused

WindfallWendy said:

Sorry, lots going on here.
I'm 47 and rejoining CSP (left in 2006 with 5 years service)

1) alpha Vs partnership - I think alpha seems preferable. I want defined benefits to draw down alongside my other DBs (local government and USS) to have a half decent income.

2) But I want to add in to my pension too, which makes me think partnership (DC) would be better. Additional pension in alpha seems to need me living a very long time, if it's going to be worthwhile and I'm not banking on that to be honest. (It seems like a swizz as an additional £300/month payment in, will lead to and extra £270/year on my pension).

3) If I go for alpha, and DBs, then I could just get a SIPP and put overpayments in there, right? And draw what I want, when I want it. But of course I miss out on the 3% my employer would match if I went with CSP partnership DC scheme.

Anyone else had to make this decision recently? 

To make things even worse, the pensions team at work say that I will only get contributions backdated to my start date if I send them the form back this week (I only received it from them last Thursday (30th Jan) having asked them for it on 7th Jan). So the pressure is on to make a decision quickly!

Given what you say in 1) the sensible option seems to be 3).

You get the good plated DB pension Alpha provides.  And can build up a separate DC pension pot which can be drawn down, pretty much as you wish with a modern scheme.

NB.  There is nothing you can "draw down" with Alpha, you get a pension in accordance with the scheme rules.  A bit like deferred salary.

WindfallWendy

Thanks guys!!! 

I did think @hugheskevi that given the DB nature, the lovely 28% contribution is neither here nor there as it isn't going to be related to an investment pot. Thanks for all the detail you have shared on that. 

I'm glad you all generally agree I'm on the right lines. I'm still struggling with the concept of what I will want/need from a pension (currently on track for £13k plus state pension from 67), and think I want to prioritise being able to have the flexibility to stop working before I'm 60 if I feel so inclined, whilst also wondering if I should prioritise doing things with my money now. 

I probably should get a financial advisor, but since I don't know the answers to the questions they will ask me ("what do you want?") it seems a bit pointless.

WindfallWendy

Dazed_and_C0nfused said:

WindfallWendy said:

Sorry, lots going on here.
I'm 47 and rejoining CSP (left in 2006 with 5 years service)

1) alpha Vs partnership - I think alpha seems preferable. I want defined benefits to draw down alongside my other DBs (local government and USS) to have a half decent income.

2) But I want to add in to my pension too, which makes me think partnership (DC) would be better. Additional pension in alpha seems to need me living a very long time, if it's going to be worthwhile and I'm not banking on that to be honest. (It seems like a swizz as an additional £300/month payment in, will lead to and extra £270/year on my pension).

3) If I go for alpha, and DBs, then I could just get a SIPP and put overpayments in there, right? And draw what I want, when I want it. But of course I miss out on the 3% my employer would match if I went with CSP partnership DC scheme.

Anyone else had to make this decision recently? 

To make things even worse, the pensions team at work say that I will only get contributions backdated to my start date if I send them the form back this week (I only received it from them last Thursday (30th Jan) having asked them for it on 7th Jan). So the pressure is on to make a decision quickly!

Given what you say in 1) the sensible option seems to be 3).

You get the good plated DB pension Alpha provides.  And can build up a separate DC pension pot which can be drawn down, pretty much as you wish with a modern scheme.

NB.  There is nothing you can "draw down" with Alpha, you get a pension in accordance with the scheme rules.  A bit like deferred salary.

Yes, I knew when I wrote "draw down" it was the wrong phrase. I just mean receive/claim/get at some point 😄 

Dazed_and_C0nfused

WindfallWendy said:

Thanks guys!!! 

I did think @hugheskevi that given the DB nature, the lovely 28% contribution is neither here nor there as it isn't going to be related to an investment pot. Thanks for all the detail you have shared on that. 

I'm glad you all generally agree I'm on the right lines. I'm still struggling with the concept of what I will want/need from a pension (currently on track for £13k plus state pension from 67), and think I want to prioritise being able to have the flexibility to stop working before I'm 60 if I feel so inclined, whilst also wondering if I should prioritise doing things with my money now. 

I probably should get a financial advisor, but since I don't know the answers to the questions they will ask me ("what do you want?") it seems a bit pointless.

If you decide you want paid for advice then you really only go for an independent financial advisor.

jimi_man

Emmia said:

If you go for alpha the employer contribution is much higher than the 3% the employer gives you in partnership.

I'd personally go for Alpha and then additional savings either in a SIPP or in a S&S ISA

https://www.civilservicepensionscheme.org.uk/your-pension/managing-your-pension/contribution-rates/

I think 3% is the extra employer contribution that Partnership adds on top of the age related contribution. So, providing your employee contributions are sufficient then the total employer contributions are 17.5% at the OPs age.