CS pension scheme - Classic/Alpha/VR scheme

IceCreamCone10

Hi, have been thinking more on this as will be 55 and thanks for all previous replies on here. Just some other questions:

• If you completely retire at 60, is it right that it’s best to take legacy Classic at 60 as you don’t gain anything from deferring it. 

• Is it also right that if you are ok with the actuarial reduction and increased tax liability, then you could also take Alpha (and added pension) at 60 because when it comes into payment, CPI is applied? Whereas there is no longer any salary added to your annual pot as you’ve stopped work at 60.

• Once you’ve made your choices to MyCsp on when to take Classic and Alpha/added pension, you can’t change your decision? Do you have to make the decision for both schemes and Alpha added pension at the same time?

• I don’t understand one thing about the VR scheme and am probably misunderstanding it. You or the employer cover the pension buyout if needed so there’s no reduction on pension accrued at date of exit. If the MyCsp retirement modeller already takes into account the actuarial reduction for Alpha taken at say 60, why do you need to use your severance pay to buy out taking your pension early at 60? The legacy Classic element will also be paid at the same time (with no actuarial reduction if at 60) and presumably won’t qualify for the employer top up, only the Alpha as that is the main scheme? The Alpha added pension can be deferred however.

• In a VR scenario, could it also be better to opt for Alpha in the McCloud remedy period if Classic in remedy would otherwise be best in normal retirement? The other option would be taking the severance pay and then take Classic/Alpha/added pension at a later date.

Thanks in advance.

hugheskevi

If you completely retire at 60, is it right that it’s best to take legacy Classic at 60 as you don’t gain anything from deferring it.

In general yes, but it depends on personal circumstances. If not taken at NPA you would receive arrears (but no interest or actuarial uplift) when you do come to take it. In some circumstances this could lead to a tax advantage, eg, if you were going to another job at 60 and would be a higher rate taxpayer but in future would have a much lower income.

Is it also right that if you are ok with the actuarial reduction and increased tax liability, then you could also take Alpha (and added pension) at 60 because when it comes into payment, CPI is applied? Whereas there is no longer any salary added to your annual pot as you’ve stopped work at 60.

You can take alpha at age 60 with actuarial reduction if you wish.

Once you’ve made your choices to MyCsp on when to take Classic and Alpha/added pension, you can’t change your decision? Do you have to make the decision for both schemes and Alpha added pension at the same time?

Irrevocable. You make decisions about classic and alpha at the same time, but the decisions can be different, eg, you could leave alpha deferred. Alpha added pension would follow the decision made about alpha main scheme.

I don’t understand one thing about the VR scheme and am probably misunderstanding it. You or the employer cover the pension buyout if needed so there’s no reduction on pension accrued at date of exit. If the MyCsp retirement modeller already takes into account the actuarial reduction for Alpha taken at say 60, why do you need to use your severance pay to buy out taking your pension early at 60? The legacy Classic element will also be paid at the same time (with no actuarial reduction if at 60) and presumably won’t qualify for the employer top up, only the Alpha as that is the main scheme? The Alpha added pension can be deferred however.

The MyCSP shows alpha taken at 60 with actuarial reduction. Buy-out removes the actuarial reduction. You do not have to buyout the reduction under VR, you could choose cash entitlement.

Classic would qualify for buyout if you were under 60, it does not matter that you would be accruing new pension in alpha. In the case of buyout, Added Pension does not qualify for employer funded buy-out, so if employer funded buy-out applies then the alpha added pension could be deferred.

In a VR scenario, could it also be better to opt for Alpha in the McCloud remedy period if Classic in remedy would otherwise be best in normal retirement? The other option would be taking the severance pay and then take Classic/Alpha/added pension at a later date.

Yes, employer funded buy-out would in general favour choosing alpha for the remedy period.

IceCreamCone10

Many thanks hugheskevi. This clears up a lot of confusion for me.

So this is a possible scenario in terms of understanding all the rules and principles:

• take VR at say age 57 and employer funds buyout on Classic. Does Classic therefore default to being the main scheme to benefit from employer funded buyout? Or can you choose which scheme you want for the employer buyout to apply? If it was possible to choose Alpha then the employer buyout would surely be considerable in order to get the pension you would be getting at 67 (SPA) so it’s really best to have employer buyout on Alpha? (And then the Classic element would be actuarially reduced.)

• If employer buyout was on Classic, can you also still specify Alpha for the remedy period or is that not possible? I.e. employer buyout and remedy period must be applied to the same scheme.

• Assuming employer buyout on Classic, you get the pension at 57 that you would have got at 60. At the same time you also receive the Alpha pension (as both schemes come into payment simultaneously under VR) but that will be actuarially reduced for age 57.

I read about the tapering element under VR for those close to NPA but I am still grappling with these basics here before reading on that issue. Also will need to consider when a cash entitlement is better than opting to buy out the reduction under VR.

Thanks very much again.

hugheskevi

take VR at say age 57 and employer funds buyout on Classic. Does Classic therefore default to being the main scheme to benefit from employer funded buyout? Or can you choose which scheme you want for the employer buyout to apply? If it was possible to choose Alpha then the employer buyout would surely be considerable in order to get the pension you would be getting at 67 (SPA) so it’s really best to have employer buyout on Alpha? (And then the Classic element would be actuarially reduced.)

There is no concept of 'main scheme' - you are an active member of both classic and alpha. You are accruing new service in alpha. Both classic and alpha will benefit from employer funded buyout from age 55 (classic only if exited between age 50-54).

If employer buyout was on Classic, can you also still specify Alpha for the remedy period or is that not possible? I.e. employer buyout and remedy period must be applied to the same scheme.

The choices offered under Remedy will show the effect of buy-out on both alpha and classic under each Remedy option.

Assuming employer buyout on Classic, you get the pension at 57 that you would have got at 60. At the same time you also receive the Alpha pension (as both schemes come into payment simultaneously under VR) but that will be actuarially reduced for age 57.

No, buyout is applied to both schemes.

I read about the tapering element under VR for those close to NPA but I am still grappling with these basics here before reading on that issue. Also will need to consider when a cash entitlement is better than opting to buy out the reduction under VR.

Tapering only applies as you approach the alpha normal pension age, ie, age 67, so not something that needs concern you for a while yet.

If you are offered VR, it should be the better decision until you are at least 58 or so, and probably quite a bit after that too.

IceCreamCone10

Ah employer funded buyout on classic if exited between age 50-54 means I will miss that boat then.

Many thanks hugheskevi, very grateful for all your advice on this.

hugheskevi

IceCreamCone10 said:

Ah employer funded buyout on classic if exited between age 50-54 means I will miss that boat then.

Many thanks hugheskevi, very grateful for all your advice on this.

You get buyout between 55-59 too - it is just that between age 50-54 you can only get buyout on classic as you have not yet reached the alpha minimum pension age. 

Between age 55-59 you get buyout on both alpha and classic, and between 60-67 you get buyout on alpha only as you have reached classic normal pension age.

IceCreamCone10

Got it now (hopefully!), many thanks again hugheskevi.

Andy_L

IceCreamCone10 said:

• Is it also right that if you are ok with the actuarial reduction and increased tax liability, then you could also take Alpha (and added pension) at 60 because when it comes into payment, CPI is applied? Whereas there is no longer any salary added to your annual pot as you’ve stopped work at 60.
• 
  

If you don't take it it is still having CPI applied. Unlike, eg, the NHS scheme there is no difference in the revaluation rate for deferred vs active.