Early retirement options for civil servant - EPA, SIPP, ISA??

[GoldOnyx]

Hi all,

I’d really appreciate some pensions advice please.

For context, I’m in my early thirties. I work in the Civil Service and pay into the Alpha pension (and have done so since I joined in 2018). I can claim the full Alpha pension at state pension age, which is currently 68 for me, but might increase.

As well as paying into the Alpha pension, I have a Lifetime ISA. I’m intending to use this for retirement - both to tide me over until state pension age (as I’d like to retire before 68) and to use during my retirement.

I’ve been looking into whether I could retire before 68 (current state pension age) - e.g. if I could retire at 64 or 65. One way in which I can do this is to pay into an EPA (Effective Pension Age), which is a part of the Civil Service pension scheme. To pay EPA, I can choose to opt in or out each tax year, providing I’m still working in the Civil Service. The idea is that I pay monthly EPA payments, and if I continue making those payments throughout my career, I have the option of retiring either 1, 2 or 3 years before state pension age on my full CS pension.

I started making EPA payments at the start of this financial year for the option of retiring 3 years before state pension age. I decided to pay EPA payments because they’re flexible and I can opt in and out each year, and they allow me to retire before state pension with my full CS pension.

Also, my understanding is that paying EPA payments reduces the tax I pay. I could be wrong, but it looks to be the case, from checking my pay slips so far this year. I’m a basic rate taxpayer now, but I may start paying higher rate tax in the next few years. Therefore, I’m wondering if it makes sense to continue EPA payments from both an early retirement and tax efficiency perspective?

I am still wondering though if paying into an EPA is the best option for me. Are there other better options for me to retire on a good pension before state pension age - especially as I have a long career ahead of me and am not sure if I’ll spend my whole career in the CS? E.g. should I use a SIPP instead? As mentioned, I already have a Lifetime ISA, which I’ll also use for retirement, and I also pay into an ISA.

Thanks!

Hi OP. I'm in the civil service pension scheme, early 30s and joined in 2020 although a higher rate tax payer. I agonised over whether to start doing added pension, EPA or AVCs as like you, not keen on working until 68. You should do more reading around the different schemes as it's a personal decision and I don't think there is one "right" answer. For example, I believe there are differences across all three as to what would happen if you die before retirement age (this seemed like a particular con for EPA if I recall correctly, as it dies with you). However, a pro for EPA is that it's a fairly "safe" option in that you pay a fixed amount and receive a fixed/guaranteed outcome.

Personally I started doing AVCs at the same percentage as my EPA-3 would have been. Ie I'm paying the same per month, via salary sacrifice (to get the same tax benefits) into a private pension with L&G. This is slightly different to a SIPP I think as it's arranged through your employer. This option allows me to build up a defined contribution "pot" that I can access from SPA-10 so currently 58 but may change. The reasons I went for this option are:

• I was prepared to take more risk with this added pension, as my main DB pension is fairly low risk
• I have more flexibility in the future, e.g. I could choose to draw down flexibly from the pot to allow me to partially retire at 60, or treat it as EPA and fully retire three years early. I just don't know yet which of those options might be best when the time comes so I liked the idea of leaving options open.
• I can choose which fund I invest in, meaning there is a chance my investment could outperform the equivalent calculation for EPA (ie yield more money for the same amount invested). This of course is not guaranteed but given my age I was happy to invest in a higher risk fund for now.