alpha is a Career Average pension scheme. This means you build up alpha pension based on a percentage of how much you earn each scheme year. A scheme year runs from 01 April to 31 March.
You build up alpha pension by adding 2.32% of your actual pensionable earnings from each scheme year to your alpha pension
What earnings are used?
Your actual pensionable earnings are used to work out the 2.32% that is added to your alpha pension. This is the amount you actually get paid (before any tax or National Insurance is deducted).
Most of your earnings will usually be pensionable earnings. They will include any allowances that Cabinet Office has agreed are pensionable. Some bonuses are not pensionable. Your employer will be able to tell you which parts of your pay will be pensionable.
What if I work part-time?
Your actual pensionable earnings are used to work out your benefits, so this takes into account the reduced amount you earn.
What about cost of living increases?
Your total alpha pension is adjusted in line with prices every year that you are an active member of alpha. HM Treasury (the government’s economic and finance ministry) decides exactly how much the adjustment should be.
This adjustment can be either positive or negative. This means the value of your pension can increase or decrease by this adjustment.
How does an alpha pension build up?
The example below shows the way a Career Average pension, like alpha, builds up. In this example we have assumed a small cost of living increase is applied each year.
If you earned £20,000 in one scheme year, on 31 March of that year you would add £464 to your alpha pension: £20,000 x 2.32% = £464
The annual adjustment is applied to the total pension balance at the start of the scheme year, in this case it’s a 1% increase: £464 + 1% = £468.64
If you earned the same amount the following year, you would add another £464: £20,000 x 2.32% = £464 £468.64 + £464 = £932.64
The annual adjustment is applied to the total pension balance at the start of the next scheme year, again it is a 1% increase: £932.64 + 1% = £941.97
This continues every year you are an active member of alpha.