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Should i opt out of the Civil Service pension scheme?
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The first thing to do is work out if you think your existing pension plus State Pension will be adequate, or whether you think you will need more or less. That determines whether you decide to enhance your long-term pension or are more likely to take it early with acturial reduction. That in turn influences your strategy for your 50s and 60s.Well everyone seems to think it's foolish to opt out so i don't think i'll be doing that. What would you do if you were in my shoes?
Note that it is likely your alpha pension will be improved between 2019-2023 (see this link for more detail).
You have many years until retirement, so the main thing is to take advantage of what is available now rather than having a finely crafted plan that will inevitably change. Currently minimum pension age is 55, which several years ago was announced would increase to State Pension age minus 10 years (so 58 for you, based on current State Pension age), but hasn't been enacted yet.
That means that for funds for years prior to age 55, the tax-advantaged savings vehicles to consider are firstly primary dwelling, then ISAs, and (more complicated) venture capital trust (VCT) investments. For years between 55-58, there is a significant risk you won't be able to use a pension to fund them, in which case the options are as above. Although retiring before minimum pension age is entirely plausible, it is harder due to the need to fund the period from less tax-efficient vehicles.
For years between age 58-60, a Defined Contribution pension would be suitable. If you expect to be a higher rate taxpayer in the future, that is an ideal time to make additional pension saving (especially if you would be affected by the Child Benefit taper)
For years between 60-68, a Lifetime ISA is attactive, although only small contributions each year can be made to it so Defined Contribution pension is likely to be an efficient way to top-up the LISA resources.
For years between 65-68, EPA is attractive if you want a secure income, supplemented with Defined Contribution pension to cover the amount you will in future get from State Pension.
More generally, Added Pension is an option if you want a higher alpha pension. Or you can retire after age 68 and your alpha pension would be actuarially increased. Similarly if you took your State Pension after 68 it would be increased to reflect the shorter time you will receive it.
The likely answer is that buying your own home, ISAs (especially LISAs), defined contribution pension, alpha pension and state pension will all be part of an efficient plan. In addition to that, EPA and Added Pension could be attractive, but moreso as a higher rate taxpayer (which also applies to the Defined Contribution pension). VCTs are niche, so unlikely to feature but could play a role for some. Domestic property investment works for some too, but that is less attractive than it was several years ago.
Without knowing detailed circumstances, it is impossible to say which is best, but remaining in alpha, buying own home and contributing to a Lifetime ISA (investment rather than cash) are probably the strongest contenders.0 -
I don't mean to be rude, but if you're going to progress in the civil service, you need to learn how to do basic research. Why don't you have a look at https://www.civilservicepensionscheme.org.uk/members/ and work it out? You can always use this site to check your understanding.Do you know by how much extra i would have to pay to bring it forward a few years? I am not really looking to work beyond age 55.0 -
Start educating myself! Take the pension scheme. Save extra money to cover from from 55 to state pension age. Keep spending in control.Well everyone seems to think it's foolish to opt out so i don't think i'll be doing that. What would you do if you were in my shoes?
Indeed, I've done just that. I retire in ten weeks time, at age 54.0 -
As marlot says, especially the bit about keeping spending under control.Well everyone seems to think it's foolish to opt out so i don't think i'll be doing that. What would you do if you were in my shoes?
Also don't expect to fully retire at age 55, plan on the basis you are likely to need/want to work at least part time for a period after 55, perhaps on a consultancy basis. Think about how you want your Civil Service career to progress so you can leave/retire with skills marketable in the private sector."In the future, everyone will be rich for 15 minutes"0 -
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Well everyone seems to think it's foolish to opt out so i don't think i'll be doing that. What would you do if you were in my shoes?
Here's what I have done as an example of someone's thinking/planning. I'm 50, have a working partner, I work in Civil Service and want the option of retiring at 55 so I am currently:
1. Saving half my salary, which consists of a mix of...
2. Saving (mostly cash) in a SIPP, with a small portion in HSBC Global Strategy Balanced fund which I am adding to in order to provide enough funds to draw down fully my annual tax free allowance for 5 years until age 60. I have included an estimate of inflation in this.
3. Saving into a S&S ISA with a 70%/30% equity/bond split, will reduce to 60/40 when I hit 55
4. Buying added pension in the CS Alpha pension to avoid 40% bracket in addition to SIPP
5. I have 19 years banked in the CS Premium Pension, which I aim to draw at 60 without taking the lumpsum
At 55 I aim to draw Alpha pension with actuarial reduction and drawdown from SIPP upto the tax free allowance each year to deplete completely in 5 years until I reach 60 at which point Premium Pension will start and take over.
I have the option of boosting my income with 3.5% drawdown from my ISA. I'm also experimenting with income funds at the moment, which I hope to get to the £100 per month of income by the time I retire.
I have several contingency plans in case of redundancy and know what I will have to spend (budget) in case of redundancy from age 51, 52, 53 and 54. From my starting retirement year I increase my income requirement by inflation each subsequent year. No harm in planning and being forarmed!
My spreadsheet shows that I could comfortably retire from age 53 WITHOUT redundancy, and only slightly less confortably from age 51 WITH redundancy.
From age 51 (with redundancy) I will be able to draw down the equivalent of my current half net salary allowance. Each year my retirement is deferred I can increase my standard of living in retirement from what it is now, since I will no longer be saving for retirement! All options are increased by inflation each year.
That's what I do in my shoes.If you want to be rich, live like you're poor; if you want to be poor, live like you're rich.0 -
But a very important topic and well worth making the effort to understand your options.
They make it too complicated with all the different schemes and constant changes to the benefits and all the CARE, DB, DC, etc. Probably best to consult a pensions advisor for most people.
Save 12K in 2020 # 38 £0/£20,0000 -
Your future, your choice whether to educate yourself.They make it too complicated with all the different schemes and constant changes to the benefits and all the CARE, DB, DC, etc. Probably best to consult a pensions advisor for most people.
I made sure I knew all about the pension scheme I joined.
The OP simply needs to read up about his particular scheme and keep abreast of any changes.
Personally, I don't think anyone needs to see a financial advisor if making a decision like whether it's a good idea to remain in the Civil Service scheme.0 -
Sure, but the OP has two (sensible) choices at the moment. Either stay in Alpha (CARE/DB) or move to partnership (DC). Anything else is throwing money away.They make it too complicated with all the different schemes and constant changes to the benefits and all the CARE, DB, DC, etc. Probably best to consult a pensions advisor for most people.
He then has a few years to think about whether/how to make provision for an early retirement if that's still a desire.0 -
.....choosing to opt out of a civil service pension..!!!!
..and here's me thinking that you must have some basic intelligence to work for the civil service in the first place..
As a fellow Civil Servant of the OP I can tell you its rampant throughout that people have no idea of what their pension is even called no matter how its works , if I had a £1 for every time I have explained it to someone I wouldn't be working there!!!!
Sam"You've been reading SOS when it's just your clock reading 5:05 "0
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