New CS - Advice for future planning with spare income each month

1Tomato_forest

Hello,

I have recently joined the civil service and am looking at the options for a few hundred pounds I have spare each month.

I am 40+ years from NPA. I have built up an emergency fund and have a S&S ISA with a global equity fund.

Can anyone explain the pros and cons of buying added pension, EPA, AVCs linked to the Alpha scheme, a separate SIPP, or increasing my S&S ISA.

Thank you in advance for your help and time.

El_Torro

I have no first hand experience of a Civil Service pension but from what I hear from others, buying more into your pension is likely to be the best long term investment. AVCs or opening a SIPP (AVCs are probably a better option than opening a SIPP) have the benefit that you can access your money before state pension age. Most likely to be at 58 or older. Investing in an ISA is the least tax efficient of these options but at least you can access your money whenever you like. 

Have you looked at opening a LISA? This might be a good option, especially if you have not yet bought your first property. 

All the options you mention have their pros and cons. Apart from opening a SIPP probably being a bad idea it's not possible to say which option you should go with without knowing more about you. Even if you do tell us more it's about what you're comfortable with and how you think the next 40 years might play out (that's anyone's guess of course).

Marcon

1Tomato_forest said:

Hello,

I have recently joined the civil service and am looking at the options for a few hundred pounds I have spare each month.

I am 40+ years from NPA. I have built up an emergency fund and have a S&S ISA with a global equity fund.

Can anyone explain the pros and cons of buying added pension, EPA, AVCs linked to the Alpha scheme,

start by reading the information on the CS website, which covers all these options: https://www.civilservicepensionscheme.org.uk/your-pension/managing-your-pension/increase-your-pension/

a separate SIPP,

much more flexibility in terms of how and when you take your benefits, but no certainty of what they will be

or increasing my S&S ISA.

No minimum age to access the funds, which is either a pro or a con, depending on your viewpoint! Have you considered a LISA? https://www.moneysavingexpert.com/savings/lifetime-isas/

Please see above. Some general reading on savings and pensions would help you increase your understanding and thus your confidence in taking a decision. Try https://www.moneyhelper.org.uk/en

hara____

As you and El Torro suggest, there's not a simple 'best' option. A few factors worth considering:

- you might want to bank extra Alpha while you have the chance, if you aren't necessarily going to be a career civil servant 

- your long investing horizon might favour AVCS or a SIPP seeing as equities should, in theory, give a better return 

- added Alpha and EPA are very similar as you can, per the current rules, take Alpha early but suffer an actuarial reduction

- for higher rate tax payers, a SIPP can have practical advantages: you can decide late in the year how much to add to minimise 40% tax. AVCS does have some flexibility but the admin can be clunky. With extra Alpha you have to commit for the year (I think?) or do lump sums limited by monthly pay

- then again, for higher rate taxpayers, using a SIPP you need to claim the full tax benefits yourself, whereas with AVCS this is automatic (payments are taken from gross) - or maybe you need to check that is the same throughout the CS

- the AVCS has a limited fund range but it's okay if you would be focusing on equities

All told, perhaps the key choice is whether you want your returns to be market-driven (AVCS, SIPP) or whether you prefer to build more inflation-linked funds (Alpha).

I'm not sure we can comment on pension Vs ISA Vs LISA without more context.

nell_wen

The Civil Service pension awareness week is coming up next month and you may find some of the sessions useful either to sign up and join at the time or they are usually available to watch back later if you can’t make them

https://www.civilservicepensionscheme.org.uk/knowledge-centre/resources/pension-awareness-week-2025/

kempiejon

Those more knowledgeable can opine but I expect some good benefits come from buying more civil service credits as DB pensions are great. I don't know.
I know that when I was decades from retirement my focus was on ISAs as I wanted to be able to step out of permanent employment and use my investments for living expenses long before I was 55.

hugheskevi

The guides have most of the things you need to know and consider, but one thing that is often overlooked is that SSISAs can often be useful as a waiting place on the way to a pension. 

That is very helpful when you are not certain you want to lock the funds away in a pension at the current time, or would not benefit from the biggest advantages of a pension, ie, being a higher/additional rate taxpayer, having access to salary sacrifice, or getting matching employer contributions. Using an SSISA retains access to the money, gets equities returns, and money can later be moved into a pension (technically contributing more from salary and using SSISA funds to supplement income) either when you are sure you do not need access or when you get more relief on contributions.

1Tomato_forest

Thank you all for your responses, I appreciate the points you have all raised.

I hadn't considered a LISA but having read through the link provided I'm not certain it's the option for me at the moment. With the money being slightly less accessible until age 60 and as I am fortunate enough to have just got on the property ladder. Though I will keep it in mind.

I have also signed up for pension awareness sessions as suggested and read through the pages on the CSP website again.

Yorkie1

All the above points are really helpful.

With EPA, you decide to do it per financial year. That year's accrued amount in Alpha can be taken x years early without reduction. You have to take all your Alpha pension at the same time, so if you do take Alpha at x years early, then any pension relating to years in which you didn't do EPA will be paid reduced (about 4-5% per year early).

With added pension, again you decide to contribute annually. You don't have the right to take it early unreduced, but as someone pointed out to me (just after I'd started EPA), but if you do take Alpha x years early, then the net overall effect is very similar to the result from EPA x years early. It does make for a more straightforward pension benefit statement and calculation if you do choose to take Alpha earlier than state pension age.

AVCs in Alpha are, like others have said, invested into a S&S fund with Legal and General. They set an initial default fund depending on the year you will reach state pension age, but you can choose to change it if you wish. You can take AVCs at any time after 55 (or 57, probably for you), whether or not you are still working and/or claiming Alpha.

You can increase, reduce, or stop your contributions to AVCs at any point (with probably a month or so's notice). The contributions are taken from your salary before your tax is paid, so there's no need to go through the reclaim of any tax with HMRC.