Alpha pension - lump sum and early retirement

runofthemill2

Hi,

Can anyone help me with this question? I have a civil service Alpha pension and plan to take early retirement. The guidance says I can convert £1 of pension to £12 of lump sum but it's not clear to me whether it means £1 of pension entitlement if I retired at SPA or £1 of the actual pension I'd receive after the actuarial adjustment for early retirement. Anyone know?

Thanks!

hugheskevi

You do the actuarial adjustment first, then commute for lump sum.

For example, say you had £10,000 p/a of pension payable from SPA of 67. You take the pension early, such that there is a 10% reduction and so £9,000 p/a is payable. You then decide to exchange £2,000 of pension for a lump sum, so that you get £7,000 pension paid early, with a £24,000 lump sum.

runofthemill2

Thanks for such a clear answer!

QrizB

Noting that 12:1 isn't a great commutation factor for a 67-year-old who might reasonably expect to be receiving pension payments for 20+ years, if you're retiring early (and missing out on even more years of payments) it's an even worse deal.