Transfer DC pension pot into Civil Service pension?
Discussion
Hi all, looking for some thoughts/opinions on my current situation...
I have a deferred Civil Service Pension Scheme (Alpha) with 3.5 years service from earlier in my career. After a short stint in the private sector I returned to a GovCo which offered generous DC pension contributions which I have been maximising in my 2.5 years service here. The entire company is being TUPE’d in to the Civil Service, so I will go back to the CSPS (Alpha), which overall I’m happy about.
We are able to transfer our DC pension pot to Alpha at CETV (Cash Equivalent Transfer Value). Since I haven’t officially been TUPE’d yet, I can’t get a real valuation. But, based on forum posts I’ve read it works out at roughly £40k DC pot = £5k p/a from SPA (68 in my case). My DC pot is almost half of that (~£25k by the time I TUPE across)...
I’m unsure on whether it is worth transferring my DC pot in to Alpha for the guaranteed returns albeit later than I would like (unless I take a significant cut to take it at 55-60) or transfer it to a Vanguard SIPP which I can manage myself and access at 55.
The other element to this is that I’m a higher rate tax payer, so thinking the SIPP option may be appealing further down the line when I may want to utilise the tax relief to top it up. I’m not doing this currently, instead I am investing in the FTSE Global All Cap in a Vanguard S&S ISA as I prefer the flexibility as I’m 25 and don’t like the thought of tying money up for 30+ years, despite it making the most financial sense.
On the other hand, I can pay for an EPA via Alpha to take the full amount 3 years earlier as well as “added pension” which is subject to income tax, although I must admit I haven’t read enough about this, yet. I’d still be looking to take the pension earlier than SPA -3 years, even if I did go down this route. The plan is for my S&S ISA to ride me over as long as possible whilst the CSPS pension matures.
Sorry for the long winded post but I’d like a solid plan in place that I’m comfortable with before it’s too late as it’s a rare opportunity to transfer a DC pot into a DB scheme! Hopefully someone with some DB, maybe even CSPS experience can help point me in the direction of some useful reading, or offer some advice/guidance… TIA!
I have a deferred Civil Service Pension Scheme (Alpha) with 3.5 years service from earlier in my career. After a short stint in the private sector I returned to a GovCo which offered generous DC pension contributions which I have been maximising in my 2.5 years service here. The entire company is being TUPE’d in to the Civil Service, so I will go back to the CSPS (Alpha), which overall I’m happy about.
We are able to transfer our DC pension pot to Alpha at CETV (Cash Equivalent Transfer Value). Since I haven’t officially been TUPE’d yet, I can’t get a real valuation. But, based on forum posts I’ve read it works out at roughly £40k DC pot = £5k p/a from SPA (68 in my case). My DC pot is almost half of that (~£25k by the time I TUPE across)...
I’m unsure on whether it is worth transferring my DC pot in to Alpha for the guaranteed returns albeit later than I would like (unless I take a significant cut to take it at 55-60) or transfer it to a Vanguard SIPP which I can manage myself and access at 55.
The other element to this is that I’m a higher rate tax payer, so thinking the SIPP option may be appealing further down the line when I may want to utilise the tax relief to top it up. I’m not doing this currently, instead I am investing in the FTSE Global All Cap in a Vanguard S&S ISA as I prefer the flexibility as I’m 25 and don’t like the thought of tying money up for 30+ years, despite it making the most financial sense.
On the other hand, I can pay for an EPA via Alpha to take the full amount 3 years earlier as well as “added pension” which is subject to income tax, although I must admit I haven’t read enough about this, yet. I’d still be looking to take the pension earlier than SPA -3 years, even if I did go down this route. The plan is for my S&S ISA to ride me over as long as possible whilst the CSPS pension matures.
Sorry for the long winded post but I’d like a solid plan in place that I’m comfortable with before it’s too late as it’s a rare opportunity to transfer a DC pot into a DB scheme! Hopefully someone with some DB, maybe even CSPS experience can help point me in the direction of some useful reading, or offer some advice/guidance… TIA!
A few questions to ponder. How is the transfer in calculated - does it effectively by years of service ? How is the final salary calculated - do you expect significant pay increases between now and then ? Is there a cap after which additional years service don't matter and if so, are you likely to hit that ?
How much flexibility do you want ? I quite like having a close to 50/50 split between DC & DB - it gives me a core sum forever (DB), but DC lets me shift more to the early years of retirement and means I can start taking it at 55 (though that age will rise)
How much flexibility do you want ? I quite like having a close to 50/50 split between DC & DB - it gives me a core sum forever (DB), but DC lets me shift more to the early years of retirement and means I can start taking it at 55 (though that age will rise)
Carbon Sasquatch said:
A few questions to ponder. How is the transfer in calculated - does it effectively by years of service ? How is the final salary calculated - do you expect significant pay increases between now and then ? Is there a cap after which additional years service don't matter and if so, are you likely to hit that ?
How much flexibility do you want ? I quite like having a close to 50/50 split between DC & DB - it gives me a core sum forever (DB), but DC lets me shift more to the early years of retirement and means I can start taking it at 55 (though that age will rise)
I’m not sure on the underlying calculations on how much “additional scheme membership” my DC pot “buys” me but as mentioned in my OP, those who have done so with a £40k DC pot have been offered £5k p/a from SPA.How much flexibility do you want ? I quite like having a close to 50/50 split between DC & DB - it gives me a core sum forever (DB), but DC lets me shift more to the early years of retirement and means I can start taking it at 55 (though that age will rise)
It’s not a final salary scheme, it’s career average. As I’m being TUPE’d in, my salary is significantly higher than my new Civil Service “grade”, so no, no real pay rises for the foreseeable future. Even if I were to get promoted, I would have to accept the lowest pay of that grade which would result in a small pay rise ~10%. However, having access to the DB pension once more at a significantly higher rate of pay eases that for me somewhat…
No, there’s no cap or anything like that, the only thing that I’ll likely hit if I stay in this (or any other) DB scheme is hitting the LTA.
I do want flexibility, hence the query I guess - I too like the idea of a near 50/50 split. As mentioned in my OP, I’m building my S&S ISA portfolio in hopes to allow me to retire/semi-retire in my late 40’s early 50’s, until my SIPP can be accessed, which will tide me over until my DB kicks in and eventually/hopefully state pension.
So, yeah… The question really is, is transferring in to a DB scheme too good of an opportunity to pass up in this day and age or is it a case of inserting the key into the set of golden handcuffs that are around my wrists?
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