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  • FIRST POST
    • Sumarokov
    • By Sumarokov 5th Aug 18, 7:05 PM
    • 20Posts
    • 2Thanks
    Sumarokov
    Voluntary Contributions or Topping up Alpha?
    • #1
    • 5th Aug 18, 7:05 PM
    Voluntary Contributions or Topping up Alpha? 5th Aug 18 at 7:05 PM
    Hello. I have a bit of a complicated situation and I am hoping that some of the better minds on here can offer some useful advice, hints or pointers. I am 47 and my pension is as follows:

    1. 4 years of full contributions, 19 years to contribute before 5 April 2037, 28 years when you did not contribute enough.

    2. You can get your State Pension on DATE 2038. Your forecast is 108.01 a week, 469.65 a month or 5,635.81 a year.

    3. I have until 5 April 2023 to pay voluntary contributions to make up for gaps between April 2006 and April 2016. They are basically 700 a year (I have the savings to manage this, because I put money aside when I was working overseas).

    My basic plan is to make the contributions outlined in [3]. However, is there a site (or anyone on here) that can recalculate by how much this would up my state pension, so I can check that it is REALLY worth it???

    Finally, I have just started a civil service job. I have worked one full year and contributed to Alpha (and plan to do so for the next 20 years). Obviously, right now my "annual alpha pension" is low (371).

    Are there any benefits to be had from upping my Alpha contributions, rather than paying the voluntary contributions to my state pension? Or maybe doing both?

    Happy to provide any other information needed and grateful for any pointers/advice.
Page 1
    • Sumarokov
    • By Sumarokov 5th Aug 18, 7:35 PM
    • 20 Posts
    • 2 Thanks
    Sumarokov
    • #2
    • 5th Aug 18, 7:35 PM
    • #2
    • 5th Aug 18, 7:35 PM
    Beginning with 2006-07 and ending in 2016-17, the amounts are:

    689 + 689 + 689 + 689 + 626.60 + 655.20 + 689 + 704.60 + 722.80 + 733.20 + 733.20

    Or a total to "buy" eleven years of 7,620.60
    • molerat
    • By molerat 5th Aug 18, 7:37 PM
    • 19,711 Posts
    • 13,913 Thanks
    molerat
    • #3
    • 5th Aug 18, 7:37 PM
    • #3
    • 5th Aug 18, 7:37 PM
    Those prices will increase considerably after April 2019, something around 785 each so another 1K, and increase each year.
    https://www.helpforheroes.org.uk/give-support/donate-now/
    • Sumarokov
    • By Sumarokov 10th Aug 18, 11:33 PM
    • 20 Posts
    • 2 Thanks
    Sumarokov
    • #4
    • 10th Aug 18, 11:33 PM
    • #4
    • 10th Aug 18, 11:33 PM
    I am finding it hard to understand my Alpha pension. Not so much things like when to start receiving it, but what my "annual alpha pension" is likely to be after 20 years of contributions? I have tried and not been unable to find this information at source.
    • Tom99
    • By Tom99 11th Aug 18, 12:34 AM
    • 3,091 Posts
    • 2,145 Thanks
    Tom99
    • #5
    • 11th Aug 18, 12:34 AM
    • #5
    • 11th Aug 18, 12:34 AM
    Beginning with 2006-07 and ending in 2016-17, the amounts are:
    689 + 689 + 689 + 689 + 626.60 + 655.20 + 689 + 704.60 + 722.80 + 733.20 + 733.20
    Or a total to "buy" eleven years of 7,620.60
    Originally posted by Sumarokov

    Buying all 11 years for 7,620.60 will get you an extra state pension of 51.65 per week or 2,693 pa.
    That's a cost now 2.83x the annual index linked pension pa you will get.
    There is no way topping up Alpha would match that.
    For a male in Alpha buying for retirement in 2038 then 2,693pa would cost a lump sum now of 25,881. So that's a factor of 9.61 or nearly three and a half times as much as paying the missing NI years to increase you state pension.
    What you would get for your money should be exactly the same ie and extra 2,693pa index linked to CPI with no refund if you die before collecting it in 2038.
    The state pension triple lock may even result in an increase above CPI which would make it even better value.
    • marlot
    • By marlot 11th Aug 18, 7:50 AM
    • 3,723 Posts
    • 2,851 Thanks
    marlot
    • #6
    • 11th Aug 18, 7:50 AM
    • #6
    • 11th Aug 18, 7:50 AM
    I am finding it hard to understand my Alpha pension. Not so much things like when to start receiving it, but what my "annual alpha pension" is likely to be after 20 years of contributions? I have tried and not been unable to find this information at source.
    Originally posted by Sumarokov
    Each year you work gives 2.32% of that year's salary for each year of retirement.


    As an example, if you earn 50,000 this year (and you work just the one year), you'll get 1160 each year of your retirement.


    If you work a second year, you'll get another 1160 in retirement. Plus the 1160 from last year's work.



    After 20 years, you'll have 20 of these 'slices' - so around 23,200 a year for each year of your retirement.


    But its slightly better than this - because each year the government increases the slices that you've banked by inflation.
    • shepthedog18
    • By shepthedog18 11th Aug 18, 12:43 PM
    • 1 Posts
    • 0 Thanks
    shepthedog18
    • #7
    • 11th Aug 18, 12:43 PM
    • #7
    • 11th Aug 18, 12:43 PM
    Hi,
    Excuse a question from an Alpha newbie. This is the first pension I have contributed to.
    Based on my salary my contributions are 5.45%, which in my case is 171 per month (2052 in the last year).
    As I understand it from my annual benefit statement, my benefit added this year is 2.32%, i.e. 798.

    I may be looking at this too simplistically, but to pay 2052 for a return of 798 does not seem like good value??
    Any help or advice much appreciated.
    • Linton
    • By Linton 11th Aug 18, 12:51 PM
    • 10,046 Posts
    • 10,376 Thanks
    Linton
    • #8
    • 11th Aug 18, 12:51 PM
    • #8
    • 11th Aug 18, 12:51 PM
    Hi,
    Excuse a question from an Alpha newbie. This is the first pension I have contributed to.
    Based on my salary my contributions are 5.45%, which in my case is 171 per month (2052 in the last year).
    As I understand it from my annual benefit statement, my benefit added this year is 2.32%, i.e. 798.

    I may be looking at this too simplistically, but to pay 2052 for a return of 798 does not seem like good value??
    Any help or advice much appreciated.
    Originally posted by shepthedog18

    That is 798/year for the whole of your retirement!
    • Silvertabby
    • By Silvertabby 11th Aug 18, 1:05 PM
    • 3,508 Posts
    • 5,177 Thanks
    Silvertabby
    • #9
    • 11th Aug 18, 1:05 PM
    • #9
    • 11th Aug 18, 1:05 PM
    Linton beat me to it.

    You are paying 2,052 for 798 x number of years you will live in retirement. Based on the average 20 years, that's 15,960.

    You wouldn't believe the number of people who make this mistake!
    • kidmugsy
    • By kidmugsy 11th Aug 18, 1:08 PM
    • 12,172 Posts
    • 8,613 Thanks
    kidmugsy
    I may be looking at this too simplistically, but to pay 2052 for a return of 798 does not seem like good value?
    Originally posted by shepthedog18
    Think of it as an investment that will pay 40% p.a., on and on and on. And index-linked to boot.
    Free the dunston one next time too.
    • kidmugsy
    • By kidmugsy 11th Aug 18, 1:11 PM
    • 12,172 Posts
    • 8,613 Thanks
    kidmugsy
    A general point: discussions on this board would often be clearer if people habitually distinguished a lump of money, e.g. 2,000, from a flow of money, e.g. 2,000 p.a.
    Free the dunston one next time too.
    • swanny65
    • By swanny65 11th Aug 18, 8:26 PM
    • 277 Posts
    • 81 Thanks
    swanny65
    Please also remember there is an annual adjustment to Alpha - on this years statement its is +3%. This increase the amount of the final Alpha pension. Please note is does statement the adjustment can be a negative figure
    • Sumarokov
    • By Sumarokov 12th Aug 18, 9:26 PM
    • 20 Posts
    • 2 Thanks
    Sumarokov
    One thing I don't understand is this.

    Alpha pension is a flow of money until you die.

    But is EPA just a flow of money for the number of "minus years" you select before your NPA? Or is it too a flow of money until you die?

    I thought it was the latter, because you also contribute 2.32% of your pensionable earnings. But from what I read, it is the former. Correct? So just a pension which lasts 2-3 years (depending on scheme) and then stops?
    • Tom99
    • By Tom99 12th Aug 18, 11:30 PM
    • 3,091 Posts
    • 2,145 Thanks
    Tom99
    One thing I don't understand is this.

    Alpha pension is a flow of money until you die.

    But is EPA just a flow of money for the number of "minus years" you select before your NPA? Or is it too a flow of money until you die?

    I thought it was the latter, because you also contribute 2.32% of your pensionable earnings. But from what I read, it is the former. Correct? So just a pension which lasts 2-3 years (depending on scheme) and then stops?
    Originally posted by Sumarokov

    It is the former.
    So in return for paying the EPA rate of your salary this year, if you retirement age is 68, you will get this year's pension from age 65 instead of 68.
    For the main Alpha scheme you dont contrbuite 2.32%. Your contribution will depend on you salary level and be between 4.6% and 8.05% of this years salary.
    2.32% of this years salary is the actual amount pa pension you will add, payable from normal retirement age, due to paying the 4.6% to 8.05%
    Your EPA contribution this year will depend on you age, it will not be 2.32%.
    Last edited by Tom99; 12-08-2018 at 11:34 PM.
    • Sumarokov
    • By Sumarokov 17th Aug 18, 7:31 AM
    • 20 Posts
    • 2 Thanks
    Sumarokov
    Thank you for confirming this... and for correcting me on the 2.32% bit as not the contribution (I am 48 and not quite sure what my own percentage is re contributions).

    To be honest, I cannot understand how EPA can be worth it, for just a couple of years' pension and then nada...? It seems more sense to buy added pension.
    • Tom99
    • By Tom99 17th Aug 18, 8:29 AM
    • 3,091 Posts
    • 2,145 Thanks
    Tom99
    To be honest, I cannot understand how EPA can be worth it, for just a couple of years' pension and then nada...? It seems more sense to buy added pension.
    Originally posted by Sumarokov

    EPA v Added Pension should, in theory, give you mathematically the same result.
    However they do differ very slightly depending on your age.
    I too can't see that much benefit in EPA as you can achieve the same result using Added Pension and then take it early with a discount.
    The current discount is roughly 5% for each year you take the pension early and I suppose the risk is that the rate will rise or the option to take the pension early be removed altogether at some point in the future.
    Your basic contribution rate is based on the level of your pensionable salary, the higher your salary the higher %age your contribution.
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