Civil Service Alpha - just joining at 53 and need some advice

singo

Hi,

I'm looking for some advise around my pensions (and whether finding an independent financial advisor would be any use)

I'm 53 I have 4 different pensions from the various companies I've worked for over the years in total these hold about £200k in total (two have around £10K and two have around £90K) there's nothing special about these they're all from private companies and held with well know financial companies they're all making a bit of return most of the time but also incur service charges. 

Having recently been made redundant I have now secured a new full time permanent position in the civil service - with the option to join their Alpha pension scheme (or Partnership but that doesn't seem the best idea)

The Alpha scheme looks good but also looks completely different to what I'm used to. I'm looking for some pointers regarding what happens If I transfer some of my existing pensions into the Alpha scheme. TBH It's all as clear as mud to me. I would like to simplify things and but procrastinated about combining pensions in the past. 

Any thoughts would be greatly appreciated - even if they're to go an see someone who knows about pensions!

Vitor

The Civil Service Alpha pension scheme is a defined benefit (DB) scheme, specifically a career average revalued earnings (CARE) scheme. That means benefits are calculated based on your salary and service, not on the size of a pension pot.

IMHO preserved defined contribution (DC) schemes cannot be transferred directly into Alpha. The scheme rules don’t allow it, because there is no way to convert a pot of money into “added service” within Alpha.

YOu can use Alpha’s Added Pension to buy additional pension at retirement by making tax-relieved pension payments while you're a member of Alpha.  There’s no investment risk, once bought, that extra pension is guaranteed and inflation-linked.

QrizB

Vitor said:

The Civil Service Alpha pension scheme is a defined benefit (DB) scheme, specifically a career average revalued earnings (CARE) scheme. That means benefits are calculated based on your salary and service, not on the size of a pension pot.

The bit above is largely correct.

IMHO preserved defined contribution (DC) schemes cannot be transferred directly into Alpha. The scheme rules don’t allow it, because there is no way to convert a pot of money into “added service” within Alpha.

This bit, however, is entirely wrong.

You can ask to transfer your DC pot(s) into Alpha. They will buy additional Alpha pension.

hyubh

singo said:

The Alpha scheme looks good but also looks completely different to what I'm used to. I'm looking for some pointers regarding what happens If I transfer some of my existing pensions into the Alpha scheme. TBH It's all as clear as mud to me. I would like to simplify things and but procrastinated about combining pensions in the past.

You purchase additional Alpha pension, so equivalent to a joint life annuity with uncapped CPI indexation payable from SPA. The amount of pension bought between transferring and retiring will revalue (i.e. increase before retirement) by CPI along with your regular CARE pension.

Transferring will be a two step process, getting an estimate then actually proceeding if you so choose. You've only got 12 months from joining, so I'd just get the initial request done now.

PS - the CSPS website is pretty good on the general framework:

https://www.civilservicepensionscheme.org.uk/joining-the-pension-scheme/transfer-an-old-pension-into-your-civil-service-pension/

Just ignore the references to 'Club' transfers, yours would be non-Club unless from another public sector scheme.

Vitor

 - You can ask to transfer your DC pot(s) into Alpha. They will buy additional Alpha pension. - 

It's not as simple as just moving the OP's £200k DC pensions into Alpha 'as is'. Regulation 152 puts a ceiling on how much pension credit can be awarded from the transfer, which has to be done within 12 months of joining Alpha; the value of the added Alpha pension can’t exceed 50% of your pensionable earnings at the date you joined Alpha.

The Scheme's Actuary would look at the OP's age, gender, scheme rules etc. to give a conversion factor, let's say that's 20. Dividing the £200,000 transfer in by 20 gives £10,000 a year of extra Alpha pension. If the OP's salary was £30,000 then the ceiling on additional benefit is £15,000, above the £10,000 addition so the full transfer is possible.

The Alpha conversion here provides £10,000 a year guaranteed, inflation-proof pension but only from Normal Retirement Age or close to. The price for that security is loss of flexibility (tax-free lump sum set by commutation rules, no early access, no inheritance beyond survivor’s pension).

german_keeper

I would say, as suggested above, firstly get your quote. I suspect it may take a while as the company that administers civil service pensions don't appear to be covering themselves in glory at the moment; also the contract is due to be handed to someone else soon.

Then spend the waiting time getting a full understanding of Defined Benefit and Defined Contribution pensions. And try and get as good an understanding of the Alpha scheme as you can, in my experience most people who make the effort do get a decent grasp of it, in many ways it's quite logical.

DB, especially a top scheme like Alpha, offers a guaranteed inflation proof income for life. DC offers a lot more flexibility regards options to take your pension. Generally I would think that if you expect to stay in work until State Pension age Alpha may be best, if you are hoping to retire earlier DC may have advantages. But even then with your personal circumstances it may be different. 

Silvertabby

Even if you decide not to transfer the two larger pensions into your CS pension, seriously consider transferring the two small ones.  Apart from simplifying your pensions, if the Civil Service doesn't work out for you, and you leave within the two year vesting period, the transfer(s) in will mean that you will have accrued actual CS pension rights instead of just the options of a refund (of your own contributions) or the faff of transferring it to another pension scheme.