HELP! Understanding the Alpha Pension Scheme

My monthly contribution: £203/month

This is just the cost of being in the scheme, it does not affect the benefits you accrue so is not of much relevance.

Employers monthly contribution: £1013/month.

Ignore the employers monthly contribution, it is of no relevance to you.

However I am struggling to see what this will mean once I retire (say 55)? Will I get a lump sum or a monthly payment?

You are entitled to an annual pension payable without reduction from your Normal Pension age (which is your State Pension age). You can choose to commute some of the pension into a lump sum. You can also choose to take it earlier than your Normal Pension age. Full details are in the scheme guide, available at this link.

You can use the retirement modeler, available at this link.

I have currently got a mortgage so I'm debating whether to reduce my pension contribution to pay off the house faster. Apologies for my ignorance!

You cannot reduce your contribution, it is a set amount. Your only choices which will reduce the contribution are to opt-out or switch to the Partnership pension alternative. These are very unlikely to be better than remaining in alpha.

And there was me naively thinking ~£1200 is going into my pension pot every month

You are building up an entitlement to a future income. The cost of it does not matter, that is the problem of the Exchequer. All that matters is what you have to pay to be in the scheme and the income you accrue from being in the scheme.

Is it okay for me to assume this £15k will be adjusted for inflation?

Yes, the figures are in today's price terms. Accrued pension increases each year in line with the change in prices, currently measured by CPI.

To understand what this £15k actually means, is it okay to ask myself "Can I live on £15k/year right now?" .........the answer to this would probably be yes if I was mortgage free as I don't spend much money on things.

The £15K is pre-tax, so after income tax would be £14,500 net.

The expectation is that minimum pension age will increase to be State Pension age minus 10 years. Your State Pension age is currently 68 and is likely to increase further. Hence you may well not be able to access your alpha pension until at least age 58.

You need to plan across all of your alpha, State and other pensions. Otherwise you would have a (relatively) big increase in income when you reach State Pension age. So, for example, you may wish to purchase alpha EPA or make Defined Contribution pension contributions to smooth income over the period after retirement.

Note that as earnings growth is typically higher than inflation, a figure of £15K in today's price terms will decline relative to earnings over time. Currently a full time worker earning minimum wage would take home around £15K per year. In 25 years time you would expect a full time minimum wage worker to be earning a lot more than £15K in today's terms.

SallyAnneBooth wrote: »

...And there was me naively thinking ~£1200 is going into my pension pot every month ...

Alpha doesn't have a pot as such.

What you get is a promise. And a very valuable one it is too.

For each year that you work, the civil service promises you 2.32% of your salary, every year in retirement.

So if you work there the whole of 2019, on £40k salary, you'll get £928 each year of retirement *
If you work there for the whole of 2020, still on £40k, you'll get anther £928. And so on.

Eaach £928 slice is uprated in line with inflation each year (CPI) until your retirement age. And then it continues to be uprated in line with CPI once you're retired.


* Assuming you retire at the scheme retirement age. If you take it (say) from age 55, it'll be reduced to reflect the fact that you'll be taking it for longer.