The factors relevant to comparing alpha with Premium also apply here. This section focuses on the differences between Classic and Premium that may affect that analysis.
There are two main differences between Classic and Premium:
- there is an automatic tax free lump sum in Classic (of three times the amount of the pension), there is none in Premium and
- the accrual rate is in Classic is 1.25% rather than 1.67% in Premium.
On balance, pension benefits from Premium are slightly better than those from Classic. This means that any assessment of Classic compared with alpha would be similar to an assessment of Premium compared to alpha. But at the margins, alpha will be relatively more attractive when compared to Classic than compared to Premium.
Examples illustrating the factors described in the section on comparing the options will be provided shortly.