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  • FIRST POST
    • santos565
    • By santos565 7th Aug 18, 10:12 AM
    • 3Posts
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    santos565
    Civil Service Pension Alpha
    • #1
    • 7th Aug 18, 10:12 AM
    Civil Service Pension Alpha 7th Aug 18 at 10:12 AM
    I am about to start my new job. My salary is 31,000 if I contribute the default amount (based on that salary for the next 16 years - i know it may go up but stick to that figure) how much yearly pension will I get after 16 years? (im 49 now I would like to retire at 65 not the 68 that alpha is.) and without asking for a lump sum.

    Also I have MOD Pension that is worth, at the moment, 4500 PA (plus a lump sum of approx 20,000 at the age of 60 (I have to draw this one at 60 - no deferral allowed)

    I also have a railway pension worth 4000 at the age of 60 (plus lump sum of 16,000) But I can defer this one and it will increase if deferred

    Would it benefit to transfer these over to Alpha? or should I leave them alone.
Page 1
    • letspretendforaminute
    • By letspretendforaminute 7th Aug 18, 10:30 AM
    • 64 Posts
    • 16 Thanks
    letspretendforaminute
    • #2
    • 7th Aug 18, 10:30 AM
    • #2
    • 7th Aug 18, 10:30 AM
    Personally, I'd leave the other two pensions alone as they come with better protections and expect a similar defined benefit pension to accrue whilst in your third career. In today's money ~1000 a month plus state pension.
    • marlot
    • By marlot 7th Aug 18, 10:32 AM
    • 3,649 Posts
    • 2,765 Thanks
    marlot
    • #3
    • 7th Aug 18, 10:32 AM
    • #3
    • 7th Aug 18, 10:32 AM
    This is easy to work out.

    Alpha pays 2.32% a year of your salary for each year you work. So in your case, 16 * 2.32% of 31,000 = 11,507. And its linked to CPI, so even if you don't get a pay rise, your pension will be rising each year.

    As you've noted though, it pays out at 68. If you want it to retire at 65, you have a few choices. You can pay extra to have alpha pay out 3 years early. Or you can take an acturial reduction and have it start at 65, or you can fund 65-68 using a SIPP or other savings.
    • Tayloriw1
    • By Tayloriw1 10th Aug 18, 7:46 AM
    • 18 Posts
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    Tayloriw1
    • #4
    • 10th Aug 18, 7:46 AM
    • #4
    • 10th Aug 18, 7:46 AM
    You can take Alpha pension at 55 if you want too
    • twotonealex
    • By twotonealex 10th Aug 18, 6:44 PM
    • 51 Posts
    • 14 Thanks
    twotonealex
    • #5
    • 10th Aug 18, 6:44 PM
    • #5
    • 10th Aug 18, 6:44 PM
    You can take Alpha pension at 55 if you want too
    Originally posted by Tayloriw1
    Suffering actuarial reduction of approx 5% a year (this is approx. figure from CSP contact I had recently).

    Based on the state pension age of 68 (I don't know if this applies to the OP), if you took your Alpha Pension at 55 instead of NPA at 5% reduction per year (forgetting CPI increase), you would only be contributing for 6 years (age 49-55).

    This would give you a pre-CPI adjusted annual amount of 4315.
    For arguments sake, if you reduced this from 68-55, then the amount left would be 1510 PA, not good!

    As Marlot mentioned, you can indeed pay to reduce your retirement age by up to 3 years. This is referred to as EPA and is a good option if you wanted to retire at 65 instead of 68. Note that if the NPA increased by a year, then the max 3 year reduction of EPA would naturally reduce the Alpha Pension age to 66, rather than 65.

    In this case, it would make most sense to leave the other pensions as already stated, pay EPA to reduce Alpha age by 3 years, and have some savings to bridge the gap between your required retirement income and what your 2 other pensions provide should the NPA increase by another year (pushing back your Alpha drawing age).

    Hope that makes sense!
    • hugheskevi
    • By hugheskevi 10th Aug 18, 8:36 PM
    • 2,060 Posts
    • 2,615 Thanks
    hugheskevi
    • #6
    • 10th Aug 18, 8:36 PM
    • #6
    • 10th Aug 18, 8:36 PM
    Suffering actuarial reduction of approx 5% a year (this is approx. figure from CSP contact I had recently).

    Based on the state pension age of 68 (I don't know if this applies to the OP), if you took your Alpha Pension at 55 instead of NPA at 5% reduction per year (forgetting CPI increase), you would only be contributing for 6 years (age 49-55).
    The reduction factors are published at https://www.civilservicepensionscheme.org.uk/members/actuarial-factors/.

    A Normail Pension Age 68 alpha pension commenced at age 55 would be reduced by 48.7%.

    The OP's State Pension age will be 67. An alpha pension with Normal Pension age of 67 commenced at age 55 would be reduced by 45.7%.
    • Tom99
    • By Tom99 11th Aug 18, 12:53 AM
    • 2,783 Posts
    • 1,901 Thanks
    Tom99
    • #7
    • 11th Aug 18, 12:53 AM
    • #7
    • 11th Aug 18, 12:53 AM
    As Marlot mentioned, you can indeed pay to reduce your retirement age by up to 3 years. This is referred to as EPA and is a good option if you wanted to retire at 65 instead of 68. Note that if the NPA increased by a year, then the max 3 year reduction of EPA would naturally reduce the Alpha Pension age to 66, rather than 65.
    Originally posted by twotonealex

    I don't get why EPA is a good option if you want to retire 3 years early.
    The cost works out the same as buying added pension at your retirement age then using the actuarial reduction of about 5% pa to bring it forward by 3 yrs.
    EPA seems just to complicate the already available option as its only the years you have paid EPA which are brought forward. You end up with a mix and match with some pension payable earlier than others.
    Also who is to say when you get nearer pension age you will want to take it exactly 3 year early, you may change you mind and go for say 5 years or 2 years early.
    • hugheskevi
    • By hugheskevi 11th Aug 18, 8:03 AM
    • 2,060 Posts
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    hugheskevi
    • #8
    • 11th Aug 18, 8:03 AM
    • #8
    • 11th Aug 18, 8:03 AM
    I don't get why EPA is a good option if you want to retire 3 years early.
    The cost works out the same as buying added pension at your retirement age then using the actuarial reduction of about 5% pa to bring it forward by 3 yrs.
    If all the actuarial assumptions are accurate, then the use of EPA or Added Pension would result in the same outcome.

    However, EPA has zero pension input whereas Added Pension gives a pension input, so for those who are currently or may in future be affected by Annual Allowance issues, EPA would be more attractive.

    Also who is to say when you get nearer pension age you will want to take it exactly 3 year early, you may change you mind and go for say 5 years or 2 years early.
    As alpha is both actuarially reduced for early payment and actuarially enhanced for late payment, with each year being calculated separately and then summed to give total pension, it wouldn't matter when you drew the pension (assuming you think the actuarial assumptions are reasonable).
    Last edited by hugheskevi; 11-08-2018 at 12:18 PM.
    • Tromking
    • By Tromking 11th Aug 18, 5:48 PM
    • 1,996 Posts
    • 3,998 Thanks
    Tromking
    • #9
    • 11th Aug 18, 5:48 PM
    • #9
    • 11th Aug 18, 5:48 PM
    This newly available calculator might be of use.


    https://www.civilservicepensionscheme.org.uk/members/modeller/
    If Britain must choose between Europe and the open sea, she must always choose the open sea. - Winston Churchill

    "Europe is France and Germany, the rest is just trimmings". Charles De Gaulle
    • twotonealex
    • By twotonealex 15th Aug 18, 9:08 PM
    • 51 Posts
    • 14 Thanks
    twotonealex
    If all the actuarial assumptions are accurate, then the use of EPA or Added Pension would result in the same outcome.

    However, EPA has zero pension input whereas Added Pension gives a pension input, so for those who are currently or may in future be affected by Annual Allowance issues, EPA would be more attractive.

    As alpha is both actuarially reduced for early payment and actuarially enhanced for late payment, with each year being calculated separately and then summed to give total pension, it wouldn't matter when you drew the pension (assuming you think the actuarial assumptions are reasonable).
    Originally posted by hugheskevi
    Thanks for this insight.

    Forgetting the annual allowance, is there a better option out of the two?

    I have requested to pay for the EPA - 3 years option as of next April.

    I am working from now (27) until 55. I will have 28 years of 'contributions', and earn 34K, this is expected to increase to 45K in the next 4 years. I understand how the Alpha DB scheme works in terms of pensionable income based on these figures.

    Thanks!
    • Tom99
    • By Tom99 16th Aug 18, 1:53 AM
    • 2,783 Posts
    • 1,901 Thanks
    Tom99
    Thanks for this insight.
    Forgetting the annual allowance, is there a better option out of the two?
    I have requested to pay for the EPA - 3 years option as of next April.
    I am working from now (27) until 55. I will have 28 years of 'contributions', and earn 34K, this is expected to increase to 45K in the next 4 years. I understand how the Alpha DB scheme works in terms of pensionable income based on these figures.
    Thanks!
    Originally posted by twotonealex

    Then according to the online calculator if male age 27 you will pay 2% EPA this year.
    So 2% x 34,000 = 680 gross EPA contribution this year.
    For that you will bring forward this years pension by 3 yrs from 2059 to 2056
    ie 34,000 x 2.32% = 788.80pa payable for 3 yrs from 2056 but the amount index linked from now.

    The alternative Added Pension option would buy additional pension payable from age 68 in 2059.
    To equate the above EPA with Added Pension you would have to buy Added Pension of:

    788.80/0.842 (0.842 is the pension reduction factor from age 68 to 65)= 936.82-788.80= 148.02pa

    Using the Added Pension Calculator the one off cost of buying 148.02pa from age 68 for a 27 yr old is = 812.63 but if you pay by 12 monthly instalments its 61.06x12=732.72.

    (NB there must be an error in the calculator as paying 12x Mths can't be 10% cheaper than a lump sum now?)

    So if you believe the online calculators, at age 27, EPA is slightly cheaper at 680 this year compared with Added Pension at 812.63/732.72.
    Last edited by Tom99; 16-08-2018 at 8:19 AM.
    • hugheskevi
    • By hugheskevi 16th Aug 18, 8:38 AM
    • 2,060 Posts
    • 2,615 Thanks
    hugheskevi
    Forgetting the annual allowance, is there a better option out of the two?
    Added Pension is subject to change in State Pension age, whereas the price you pay is based on your State Pension age. So if in future State Pension age increases then other things being equal EPA would be better value.

    So if you believe the online calculators, at age 27, EPA is slightly cheaper at 680 this year compared with Added Pension at 812.63/732.72.
    This could be due to way Added Pension and EPA interact with other scheme features. For example, if you suffered ill health you would receive either your full unreduced pension immediately or an enhanced pension immediately depending on the extent of ill health. In that scenario the EPA contributions would be worthless, whereas the Added Pension would still be of value.

    Similarly in the event of early death, EPA would be worthless whereas Added Pension would have value.

    (NB there must be an error in the calculator as paying 12x Mths can't be 10% cheaper than a lump sum now?)
    That would be my conclusion too, although I can't actually see it stated anywhere that it would be a 12 month period (although that is the obvious assumption). The notes say you should be able to vary the period, but that does not appear possible.
    Last edited by hugheskevi; 16-08-2018 at 8:41 AM.
    • Tom99
    • By Tom99 16th Aug 18, 9:10 AM
    • 2,783 Posts
    • 1,901 Thanks
    Tom99
    [QUOTE=hugheskevi;74666132]
    Similarly in the event of early death, EPA would be worthless whereas Added Pension would have value.
    /QUOTE]


    As you sure? I tought you got a multiple of salary if you die before retiring and effectively lose any pension contibution, be it the %age amount you have to pay, EPA or Added Pension?
    • hugheskevi
    • By hugheskevi 16th Aug 18, 9:40 AM
    • 2,060 Posts
    • 2,615 Thanks
    hugheskevi
    Similarly in the event of early death, EPA would be worthless whereas Added Pension would have value.
    As you sure? I tought you got a multiple of salary if you die before retiring and effectively lose any pension contibution, be it the %age amount you have to pay, EPA or Added Pension?
    It would be neutral for the lump sum death benefit, but the survivor benefits would be higher with Added Pension (assuming you bought self and dependents admittedly, there never used to be a choice about that so I had forgotten that was an option in alpha when I wrote the above) than they would be for EPA. It would be neutral if you bought self-only Added Pension.
    Last edited by hugheskevi; 16-08-2018 at 9:50 AM.
    • twotonealex
    • By twotonealex 16th Aug 18, 1:36 PM
    • 51 Posts
    • 14 Thanks
    twotonealex
    This newly available calculator might be of use.


    https://www.civilservicepensionscheme.org.uk/members/modeller/
    Originally posted by Tromking
    I played with this, a great tool.

    Sadly, it doesn't allow you to select a retirement age of eg. 55, with payments starting from 65.

    Is any lump sum taken tax free? I was struggling to work out how a lump sum could be worked as a percentage of the pension. Unless they look at the CETV and take it from there?
    • marlot
    • By marlot 16th Aug 18, 1:40 PM
    • 3,649 Posts
    • 2,765 Thanks
    marlot
    ...I was struggling to work out how a lump sum could be worked as a percentage of the pension. Unless they look at the CETV and take it from there?
    Originally posted by twotonealex
    I believe its commuted at 12:1
    • hugheskevi
    • By hugheskevi 16th Aug 18, 2:25 PM
    • 2,060 Posts
    • 2,615 Thanks
    hugheskevi
    Is any lump sum taken tax free? I was struggling to work out how a lump sum could be worked as a percentage of the pension. Unless they look at the CETV and take it from there?
    I believe its commuted at 12:1
    That's right, with a maximum commutation limit of the annual pension multipled by (30 dived by 7).
    • Murton
    • By Murton 17th Aug 18, 10:19 AM
    • 1 Posts
    • 0 Thanks
    Murton
    Hi, hoping someone can help.

    I'm a member of the alpha scheme and contribute 5.45%. I'm confused why the pension contribution for the year is then only 2.32%. Where is the rest going? I've tried reading the literature to find the answer but not luck.

    Any help much appreciated
    • Silvertabby
    • By Silvertabby 17th Aug 18, 10:53 AM
    • 3,346 Posts
    • 4,943 Thanks
    Silvertabby
    This is for the LGPS - but as that also uses a commutation factor of 12:1 it will work for the Civil Service scheme as well.

    How much lump sum would you like to take?
    • Silvertabby
    • By Silvertabby 17th Aug 18, 11:00 AM
    • 3,346 Posts
    • 4,943 Thanks
    Silvertabby
    Hi, hoping someone can help.

    I'm a member of the alpha scheme and contribute 5.45%. I'm confused why the pension contribution for the year is then only 2.32%. Where is the rest going? I've tried reading the literature to find the answer but not luck.

    Any help much appreciated
    Originally posted by Murton
    You are trying to compare apples with oranges !

    The amount you (and your employer) pay as pension contibutions has no actual bearing on your eventual pension. They are simply the amounts needed to make the scheme affordable.

    2.32% is your scheme accrual rate. ie, you are credited with 2.32% (plus revaluation) of your annual pensionable pay as a pension for the rest of your life.

    This sounds like a variation of the very common question 'why am I paying 500 per year in pension contributions but only get 300 per year pension?'. And the answer is .... the 500 is a one-off payment, but the 300 annual pension is paid for life. Live for the average 20 years in retirement and you'll get back 6K (actually more as it's index linked) for your 500 payment.
    Last edited by Silvertabby; 17-08-2018 at 1:31 PM.
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