CS pension - when to take Classic/Alpha

IceCreamCone10

Quick question on normal retirement outside of VR, regarding taking Classic at NPA 60 with Classic in remedy (+ standard lump sum), and deferring Alpha/added pension to NPA / SPA 67 (with Alpha in remedy - assuming Alpha in remedy is the only remedy option anyway when taken at 67).

All other things equal like lifestyle etc, I read that taking Alpha at 60 with actuarial reduction can be similar to deferring it to 67 due to swings and roundabouts. Presumably one reason to defer is to minimise the tax liability in the early years of retirement, but are there other issues to consider?

I would expect the Alpha element coming into payment at 67 (or wherever it is pegged with SPA) is pretty much a proxy for the state pension. SP itself will also add to the tax liability but that’s 10+ years away so I am not relying on it in its present state.

Thanks in advance.

Yorkie1

You probably know this, but it's a little ambiguous from your post: you can decide to:
- take Classic at its NPA, and take Alpha actuarially reduced from SPA (whatever that is)
- take Classic at its NPA, and leave Alpha until you reach SPA
- defer Classic from its NPA until you claim Alpha at SPA
- or anything in between the above!

At the point you take your first part of your pension Classic, you elect whether to treat Classic or Alpha in remedy (i.e. covered by the McCloud judgment). This is irrevocable, so you can't have both of them in remedy.

Regarding your query about actuarial reduction, I believe that it is designed to break even at about age 84 if you compare taking it over the longer period with reduction, with taking it at SPA unreduced, yes.

Depending on your other savings / investments options, there are alternatives to taking Classic + reduced Alpha. For example, with option 2 above, you could take draw-down from any AVCs or SIPPs you may have in order to fill the gap without reducing what you eventually get from Alpha. Or from ISAs. This might also tie in to whether you likely to have an IHT liability on any assets you have (e.g. SIPPs being brought within the calculation from 2027) and what plans you might have for those assets.

So it can be looked at in the round. Hope that helps.

IceCreamCone10

Thanks Yorkie1. Under normal retirement, I’d definitely want to take Classic at NPA 60 and retire full time. I am just not sure whether to take Alpha at the same time or leave it until NPA/SPA 67. I can rely on savings if needed if I defer to 67 but I read that taking Alpha at 60 with actuarial reduction can also have comparable outcomes so your break even point is interesting, many thanks for that.

If I didn’t defer Alpha to NPA then I would prefer to take it at 60 so it’s administratively more tidy to tie it with Classic. I am not really seeking to pinpoint an optimum age to take Alpha at any other age other than 67 (NPA/SPA) only because there is no actuarial reduction. I don’t have SIPPs nor have any plans for one and shouldn’t have any IHT issues.

Obviously have some time to decide plus unexpected things may happen in the meantime that may affect the decision. Thanks again.

george_jetson

I asked a similar question here last year

https://forums.moneysavingexpert.com/discussion/6545243/mccloud-again/p1

Led me to the conclusion that taking classic and alpha together at 60 (alpha reduced by 0.7) and taking alpha for the McCloud remedy period was the best option. 

IceCreamCone10

Thanks george_jetson and for the previous post. I’m still leaning towards deferring Alpha to 67 as I don’t expect big spends in the meantime and the need to cover help around the house etc in later years is a good point. But who knows what will happen in the future.

Thanks.