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  1. #1

    Clueless on Pensions - Civil Service Alpha or Partnership?

    Hello!

    I am about to begin a job with the Civil Service and have been asked to choose a pension scheme. The options I have been given are either the Alpha or the Partnership.

    I am 27 years old and honestly quite clueless when it comes to pensions. I have never been taught anything about them and when I research myself online to try to come to grips with them, I am left in a confused, stressed out state.

    I have heard that the Civil Service pension is one of the very best so I want to ensure I choose the very best available scheme. Of course I want to retire with the best pension pot possible and ideally retire before the state pension age if possible. With this currently being at 67 years old, who knows what it will be by the time I come to retirement.

    After choosing my pension scheme, I am allowed to switch to the other ONCE in my lifetime.

    WHAT KIND OF SCHEME IS IT?
    ALPHA - Defined benefit scheme. Offers a pension income based on your earnings over your career and your years of membership in the scheme.
    PARTNERSHIP - Defined contribution scheme. A type of pension where benefits are dependent on contributions and the growth of the pension fund.

  2. #2
    HOW MUCH WILL MY EMPLOYER PAY?
    FOR BOTH - Your employer will make a contribution as a percentage of your pensionable earnings.
    When clicking on the website for more information on this, it informs me that 'Employer Contributions 2017/18' for my salary band - 23,000 and under - ASLC rate from 1 April 2017 = 20.0%.
    However it also says that 'Employer partnership contributions' from 1 October 2015 which are ahe related contributions - for under 31 it is 8%.
    This confuses me - does this mean I am receiving 20% of contributions or 8%??

    WILL I GET TAX RELIEF ON MY CONTRIBUTIONS?
    FOR BOTH - You get tax relief on contributions, subject to HM Revenue & Customs rules.

    HOW DOES MY PENSION BUILD UP?
    ALPHA - You build up alpha pension at a rate of 2.32% of your pensionable pay each year.
    PARTNERSHIP - Contributions are invested in a fund of your choice by your partnership pension provider.

    RETIREMENT PENSION
    ALPHA - This will be made up of the 2.32% of your pensionable earnings each year, adjusted in line with prices.
    PARTNERSHIP - Contributions are invested to build up a pension pot that can be used to fund your retirement.

    LUMP SUM
    ALPHA - You can choose to exchange 25% of the total value of your pension benefits for a tax-free lump sum, subject to limits set by HM Revenue & Customs.
    PARTNERSHIP - You can choose to exchange some, or all of your pension pot for a lump sum, subject to limits set by HM Revenue & Customs.

  3. #3
    Basically you have the choice of a defined benefit scheme (Alpha) or a defined contribution scheme (Partnership).

    Defined benefit schemes are usually the best winners as they guarantee income based on years services and salary. The defined contribution scheme will depend on performance of your investments.

    If you see yourself working there longterm you would benefit more from the Alpha scheme.

  4. #4
    This points toward alpha, as you need more involvement with Defined Contribution pensions. Partnership is a very good scheme, and may be the better scheme is a variety of situations, but it is best to view alpha as the best default choice and only choose Partnership if you have a convincing reason to do so.

  5. #5
    To clarify, by long-term you presumably mean 2+ years, which is the vesting period for alpha. Anything beyond 2 years doesn't make much difference.


 

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