AFPS change from RPI to CPI

[Tony Clatworthy]

Military Pensions
The Government have altered how your Military Pension is affected by annual inflation. * They have changed the link from RPI to CPI which will decrease the value of your pension year on year.* Below are some examples of the loss, which have been supplied by the Forces Pension Society, illustrating the cost of the change from RPI to CPI:*
a. Disabled double amputee 28 year old Corporal £587,000 by age 70.
b. 40 year old Sergeant Royal Marines £212,000 by age 85.
c. 40 year old Squadron Leader £319,000 by age 85.
*
Please sign the petition which is very easy to do, simply click on the link below:

*Protect Military Pensions (http://www.ipetitions.com/petition/protect-our-military-pensions/)

The petition site has a blog along with a question and answer facility, do please use it.*

To help make the petition grow please pass this information on to friends and colleague's. * Support from both ex military and none military personnel for the petition is important as we believe the pension is a strong part of the Military Covenant which our Government is signed up to.

[Sloppy Link]

Tony,
Post removed in retrospect, I was unduly harsh. Please accept my apologies.

SL

[Al R]

FPS is already one of the oldest established bodies fighting for mil pensioners rights. I think I can trust Major General John Moore-Bick and David Marsh et al to spend my annual sub wisely on my behalf, although I am young enough to be able to justify an occasional kick in the nuts for the 'good' (mmm) of reducing the Defecit. But there's no point in banging on about one component in personal financial planning if;

You aren't using both annual personal allowances wisely, and planning ahead now for the incremental rises when retired.
You aren't getting 20% tax relief on pension contributions up to £3600 per annum for a non working wife/husband/civil partner.
You are paying through the nose for chronically expensive (invariably) High Street Equity based ISAs.
You aren't using your ISA allowance at all.
You arent considering other tax efficient strategies.
You are investing in a way that isn't best for you anyway.
You are chucking money down the drain into a Cash ISA without assessing why - such as having the need for an amount of ready cash (it might be tax efficient, but it will be paying something like .5% with inflation running at nearly 5%).
Your personal pension fund choices are not appropriate and/or expensive. What - you haven't considered one, or (FS) AVCs?
You are not using Form R85 and getting bank interest paid to a non tax paying other half.
You are not using Form JPA010 to reclaim some rated life insurance.
You have money parked in cash that is being eroded in value because it is paying you nothing. Assuming an annual inflation rate of 5%, £1,000.00 in 2016 will be needed to buy the same that £773.78 can today.
You haven't battered down your Utility providers in price, for at least 12 months.
You haven't told the bank you want to renegotiate a bank loan (!) to your advantage.
You haven't even thought about re-mortgaging options because its too difficult.http://www.hmrc.gov.uk/forms/r85.pdf

[Tony Clatworthy]

Unfortunately the Government took away the facility of petitions on their website so we were forced to use this one. The charge is completly voluntary and you just ignore the page and move on. I do understand your immediate thoughts though on being presented with the contribution request, I felt the same, but just ignore it.

Please do write to your MP as it is very important. Our number 2 Newsletter gives some very good tips on the procedure and also points you in the direction of the correct ministers.

http://jlrrac.org/gallery/albums/userpics/Newsletter_2.pdf



But, I do urge you also to sign the petition which we will present at number 10 during the Cenotaph week in November. We would welcome as many people along as possible to witness and support that.

Protect Military Pensions (http://www.ipetitions.com/petition/protect-our-military-pensions/)

Tony Clatworthy

[Al R]

Tony,

I think the petition system is being replaced by the right for the public to have a debate in the Commons, if public interest in a particular subject reaches a certain benchmark?

[Tony Clatworthy]

Errrrr yes but... if you get more than 500 signatures it goes as a Private Members bill which takes ten minutes of talking and then it's never seen again. Which I think is a good way of burying it. We are trying to get the Government to change it's mind with this. I think that's very unlikely but, they say they must do this because of the current debt. If that is the case why not just make it a temporary measure, I would be content with that as would many others. Or put in a catch all clause as they have for the State Pension. I'm not in this for myself as at nearly 70 it's not going to effect me but a young lad who's lost both legs or a young widow it will effect them.

While I'm on here anyone out there remember the Skeeter and Souix ? Now those were the days ....hand held map and keep well out of cloud !

[Al R]

Agreed; it will affect some more than others. At least AFCS has been improved no end recently for those most in need though.

Perhaps you are boxing them into a corner - have you suggested that any exemption might be temporary or whilst we are still involved in Afghan? Perhaps you could suggest that those most vulnerable, with a War Pension, be granted an exemption?

[diginagain]

Still sailing, Tony?

[Tony Clatworthy]

Sailing when I can but only in the Med or Caribbean.... Solent has lost its charm.

Who's that out there then ? (ex RAF through Kiel?)


Check out the Ealy Day Motions in the Commons as the Labour Party are doing just that.

Google...... 'Early Day Motion 1367'

[diginagain]

Detmold & Kiel. Saw you'd got a cushy number on the Hamble.

[F3sRBest]

Sorry to ask a numpty qu but does this apply to pensions already in payment or is it for ones that have yet to be paid?

[Tony Clatworthy]

retired two years ago but did 12 years as Harbour Master - getting a nice little LG pension which helps to get me to the Carib and the Med.

[RAFEngO74to09]

F3sRBest

Pensions already in payment are increased wef each new financial year beginning in April by the (now) CPI rate (was RPI) of the previous September. Thankfully the Government is not yet reducing pensions if the CPI is negative !

This will mean an increase of 3.1% (vs 4.6%) in April 2011 for those already in receipt of a pension.

[Tony Clatworthy]

That smal % differance over the years will mean the loss of nearly £600,000 to a widow of a 30 year old S/Sgt or other examples of the loss, which have been supplied by the Forces Pension Society, illustrating the cost of the change from RPI to CPI:*
a. Disabled double amputee 28 year old Corporal £587,000 by age 70.
b. 40 year old Sergeant Royal Marines £212,000 by age 85.
c. 40 year old Squadron Leader £319,000 by age 85.

[Tony Clatworthy]

Sorry the change is for all pensions - Public Sector

[Greenielynxpilot]

I hate to be a pedant but ... No one is losing anything.

People are maybe, at worst, going to be getting a lower increase in some years than they might have been anticipating, had they done their financial planning based on recent RPI figures.

But ... the historical differentials between RPI and CPI you are basing your analysis on should not be taken as a guarantee that future rates for either index will always have the same spread.

And ... selecting a different index is no different to changing the items in that basket of goods that make up that index, or changing the relative weighting within that basket. Both have occured quite frequently in the past, by governments of all persuasions, and neither change has ever attracted much comment at all. An individual's actual exposure to inflation is unique to their spending patterns; an index is just a benchmark to inform macro-economic policy.

Finally .... if you are going to compound an arbitrary differential between two indexes over a large number of years in order to generate your rather alarmist totals, you should at least discount that figure back into a present value (which would partially unwind the mathematical effect of this compounding over a large number of iterations to a somewhat smaller number). Whilst this would not exactly help your argument, it would be a little more accurate, and therefore more credible.

In the meantime, though - in this present financial climate people are already feeling wounded and vulnerable. Many do not fully understand monetary or fiscal policy - so don't scare them with your depressing, alarmist hype.

To put it another way - your premise is that in 2056, a then 85 year old ex-Royal Marine will be worse off to the tune of £212k if he retired this year as a Sgt. If that is the case, lets go down to the RBL and find a bunch of Royals who retired in 1966 and ask how many if them actually have this marvellous £212k nest egg that they all got, but we are going to 'lose'. I'll bet you won't find many.

[Tony Clatworthy]

Good argument...... but lets go back in time.... The Armed Forces Pay Review Body who recommends any pay adjustments takes into account a number of issues before completing their report and recomendations.

The X Factor takes account of:
It's a none contributory scheme = a minus factor.
RPI was used as the indicator = a minus factor.

Therefore the X Factor added was around 3.5% (not sure how that is used within the recommendation) so your pay rises were reduced in the past because of indexing to RPI and now your losing out.

CPI does not take account of the cost of housing - Mortgage, rent, house insurance, council tax, maintenance etc.... many ex service personnel don't get on the housing market until they are retired at 40.

Read the blog on the petition website many examples.........

(It's great being retired never had time for all this S**T before)

[cazatou]

Tony

I admire your desire to ensure that those who have left HM's Armed Forces get the best possible deal in respect of their Pensions - but I am afraid that the position of HMG will be that the Nations finances are in dire straights and that all must "share the pain".

I have served with people who volunteered from the Dominions and Colonies to serve in the RAF who suddenly found out on retirement that HMG "reserves the right" to tax "Government Pensions" in the UK no matter where in the World the Recipient resides. Ex Service Personnel who retire and return to their Country of origin or emigrate after retirement will find that they do not receive the "Winter Cold Weather Payment" unless they were in receipt of that payment PRIOR to emigrating.

It would appear that the note left for the incoming Chancellor after the election which said "I'm sorry but there is no money" was quite accurate.

[david parry]

Just an aside if you have an Oc/Pension, as well. It remains on RPI, for annual pay increases, if stipulated in your pension agreement. QUOTE "For those schemes that expressly refer to pension payments being linked to RPI, they cannot by law change the rules because it would be a worsening of benefits "

[cazatou]

dp

Perhaps you should write to that nice Mr Cameron - or perhaps we all should!!

[Tony Clatworthy]

Read this then drop him a line:~


http://jlrrac.org/gallery/albums/userpics/Newsletter_2.pdf

I did !

[Tony Clatworthy]

Today I sent out a new Newsletter, in which I attempt to set out the link to the Military Covenant and how Military Service differs from Civil Service etc.

I'm sorry but it's 7 pages.....but very easy reading.

It can be viewed online at :~


http://jlrrac.org/gallery/albums/userpics/Newsletter_3.pdf

.....enjoy !!!!

[Al R]

Tony,

This is slightly longer and not as easy on the eye, but some of it might make for useful reading for you. It relates to the impact of using CPI as the measure of price increases on private sector occupational pension schemes – consultation on Government proposals. Not public sector, admitadly, but there are some parallels.

http://www.dwp.gov.uk/docs/cpi-private-pensions-consultation-ia.pdf

In essence, the effect of the move from RPI to CPI is to reduce the value of private sector benefits over the next 15 years by £83 billions (8.4% more than the December estimate - maybe the DWP PUS is of the same school as the MoD PUS..?). For 2 million relevant active members of pension schemes, the reduction in their annual rate of pension accrual is between £2,250 per year and £2,500 a year on average - in other words, they will be up to £2,500 a year worse off right now.. that is the implied drop in their remuneration. But they won't feel it until they retire - when their pensions will be up to 12% lower than would otherwise have been the case (in real terms) in 2027 and 20% lower in 2050.

The total impact is found by summing the stock and flow impacts, i.e. costs (and equal benefits) of £83.0bn. The cash flow of these impacts will be felt over many years. For regulatory purposes it is helpful to convert this to an annual equivalent. The average annual benefits in the period to 2025 are £5.7bn. Please note that this figure does not relate to the cash flows of firms or the pensions of scheme members and is provided purely and solely for illustrative purposes.

In other words, £83 billions is being transferred from pensioners to the scheme owners and shareholders. This sort of revaluation makes the savings from RAF job losses look like a drop in the Ocean. You can bet your bottom dollar that George Osborne would quite happily delete those few words, and simply insert the word 'taxpayer'. Either way, and at the risk of instigating generation warfare, it makes retirement a far less certain place for even Generation X and the I-pod Generation, let alone either or both of those compared to baby boomers.

Playing Devil's Advocate, it puts the scale of the struggle you are going to face with your campaign in context I guess. :cool:

[brakedwell]

Whatever happens HMRC will be hovering, ready to pick your pockets by means testing over 65 and long term married tax codes. And don't forget only the basic part of the state pension will be increased annually.

[Tony Clatworthy]

What can one apart from !+***!+

[Tony Clatworthy]

PRESS RELEASE
PROTECT THE MILITARY PENSION
PETITION
The Coalition Government have failed to observe the Military Covenant and has sanctioned the devaluation of the Armed Forces Pension Scheme. We, as veterans are disappointed by the failure to discharge their promise to uphold the Military Covenant and have therefore organised a petition to help voice our concern. Currently the petition has achieved 4,000 electronic and actual signatures and can be found online at:
Protect Military Pensions (http://www.ipetitions.com/petition/protect-our-military-pensions/)
The Royal British Legion, the Forces Pension Society and a number of senior serving and retired generals have written to the Government voicing their concerns but we, as veterans wished to voice are own concern. The petition provides that opportunity and has been supported by a range of people from very senior officers in all three services to junior ranks, along with many veterans and civilians, many with gallantry medals and decorations for their service.

THE FACTS
The Coalition say:
It is right to use one index for state, public private pensions and social security benefits and the Consumer Price Index (CPI) is appropriate.

The Veterans answer that with:
The Armed Forces Pension Scheme stands apart from other public schemes for many reasons the greatest being the Military Covenant (see newsletter 3). The Armed Forces Pay Review Body adjusted previous pay recommendations over the years by taking into account RPI and the none-contributory pension scheme and adjusting the X factor. Unlike other public pensions the RPI has been imbedded within the Military Pension for many years.

The Coalition Say:
CPI is the headline measure of inflation in Great Britain forming the target for the Bank of England Monetary Policy Committee (MPC)

The Veterans answer that with:
This clearly is not the case, the primary role of the MPC is to keep the inflation rate within the government’s target set for them. Interest rates are not set with pensions in mind although it clearly has an impact.


The Coalition Say:
CPI excludes mortgage interest payments, which are not relevant to the majority of pensioners and benefit recipients: only 7% of pensioners have mortgages

The Veterans answer that with:
This is a misuse of statistics, the figure does not include service personnel. In fact following a request under the Freedom of Information Act the DWP admitted they have no figures for service pensioners who have a mortgage.
The most relevant point to note is that a service career often comes to an end after 22 years at the age of 40. Getting on the housing ladder then becomes an option that is taken much later in life for Armed Forces personnel rather than those in civilian life. This is one of the main reasons why it is so important to align service pensions with the RPI.
The CPI does not take account of the mortgage interest rate, rent, and many other costs associated with housing, which can be the largest item in any family budget.

Many spouses of service pensioners gave up working to be with their husbands/wives and children when they were posted within the UK or abroad, reducing their ability to accrue a private or public sector pension or a career. This is reflected in the military pay structure, through the X Factor.

The Coalition Say:
The methodology used to calculate the CPI takes into account the fact that many people tend to trade down to cheaper goods when prices rise - the RPI does not

The Veterans answer that with:
The stated aim of the DWP’s is to “protect the purchasing power of pensions” it seems
contradictory to use the CPI, which takes account of those needing to trade down.

The Coalition Say:
Such is the scale of the economic problems that we inherited that no part of society, not even the armed forces can be fully exempt from the need to find ways to reduce the budget deficit.
The Veterans would suggest:
The Armed Forces face restraints on their budget just the same as everybody else, however, the Armed Forces are unique in their pension needs and this must be taken account of.
Previous Newsletters
Newsletter I
http://jlrrac.org/gallery/albums/userpics/Newsletter_1.pdf
Newsletter 2:
http://jlrrac.org/gallery/albums/userpics/Newsletter_2.pdf
Newsletter 3
http://jlrrac.org/gallery/albums/userpics/Newsletter_3.pdf

[iRaven]

Debated here and not good news as I read it... House of Commons Hansard Debates for 01 Mar 2012 (pt 0002) (http://www.publications.parliament.uk/pa/cm201212/cmhansrd/cm120301/debtext/120301-0002.htm) :(

[Tony Clatworthy]

Yes, thanks for that....

An interesting point. I put a FoI request in to the Bank of England asking what do they use for their pensions...CPI or RPI. No Answer. So I asked my MP to ask.... Months past then I recieved a note from my MP with the replies she had recieved.

Bet you can't guess what the Bank of England use to link their pension to inflation.....

Errrrrrrrrrr RPI !!

It appears one rule for them and another rule for the rabble !

[UNCTUOUS]

Would anybody know whether a Service pension granted early on the grounds of invalidity in service (i.e. disability due wounds/injury) is taxable (or not)?

Just got a chitty from Pension Paymaster indicating that tax deductions had been hiked to 27.5%. Hadn't paid much attention to this before - or received any similar notices. Is this just some sort of abstract clawback?

I'm aware that HM Revenue often attributes a higher tax coding (putative and puntworthy) on the basis that if the tax-payer doesn't query it, everybody's apparently happy with their status quo. End result is a pension decrease of course, and that's why I noticed it.

I know, I'm slack and a natural victim of bureaucracy. Comes from years of wifely brow-beating.