AFPS - buying added years.

[Al R]

I was going to call the thread 'I thought about Harrier 123 and Wokkamate in the shower this morning ' but I probably would have been misunderstood.

Normally, buying Added Years comes with pros and cons and although on the surface of it they have unique advantages, they do little to add tax planning options, flexibility, options and possibilities etc. Added Years isn't like AVCs which come with their own set of pros and cons. I can see why someone in the earlier stages of a career or the later parts of an established career would certainly consider other diversified options to fund a retirement - one size doesn't fit all.

But the phrase 'caught in the middle' stuck in my mind. Although this isn't a panacea for anyone's potential pension woes right now, if you are going to be just on the wrong side of getting a gratuity/EDP/IP etc, then buying Added Years might be what is needed to creep you over the line. A call to SPVA and the Forces Pension Society for the facts and how they will relate to you and your circumstances is a must. At that point, then consider the wider, more long term picture.

http://www.mod.uk/NR/rdonlyres/853BB784-2C78-4066-837A-092270C707AE/0/afps75_05_mmp128_increasing_benefits.pdf Page 7 refers.

Forces Pension Society - Fighting for the Forces and their Families (http://www.forcespensionsociety.org) is well worth the subscription each year.

[Stuff]

if you are going to be just on the wrong side of getting a gratuity/EDP/IP etc, then buying Added Years might be what is needed to creep you over the line.

I joined on 1 Sep 99 and am still on AFPS 75, all service was after age 21.

If FAFPS comes in on 1 Apr 15 then I'll have done 15.59 years service under AFPS 75, not quite enough to get me my 16 year IP. As I understand it all that will happen is that I'll transfer to FAFPS and then on 1 Sep 16 become eligible to receive 15.59/16ths of the amount the current calculator says I would get as an EDP/IP when I leave. The rest being earned under FAFPS rules.

Would I benefit from buying the missing 0.41 of a year and if so, what would change?

[Bob Viking]

You were 1 IOT ahead of me then! I think the answer to your question may help me too.
BV

[Sandy Parts]

I don't think you can buy the 'missing' period you desire. Having paid for 1 Added Year but now leaving early - I will only actually get a proportion of that 'added year' reduced once for leaving before the full term (age 55), therefore not allowing it to 'accrue' the full value (where does it 'accrue'? - we all know it is a 'just-in-time' scheme) and reduced again as I'm not going to be making the originally expected number of payments (which I have no problem with). If you opted to buy an 'additonal year' - it won't affect the date you become entitled to an IP/EDP - it only affects what you get when you finally get it! Feel free to correct me if I'm wrong.

[Stuff]

Sandy Parts - that lines up with the way I understand it. You'll still qualify for IP/EDP at 16 years served. It doesn't have to be 16 years on AFPS75, just 16 years of Service.

The example of the Wg Cdr who did 10 years on AFPS 75 then 10 years on FAFPS from page 23 of the outline document shows that he still gets IP when he leaves after 20 years total service and the graph at the bottom shows he qualifies at the 16 year point as expected. Shame this isn't in the text and I'm relying on a worked example for confirmation.

[Al R]

Officers can buy any missing periods from the age of 21 when their '75 starts, until the age at which they started service (assuming later). The rates are worked out assuming service until the age of 55. If you leave early (as you well might), you will then get a pro rata reduction of benefits reflecting the gap from when you left until the age of 55.

Stuff, on the surface of it - no.

[VinRouge]

Anyone know if you can buy month instead of years? Is afps75 calculated based on completed years? I started serving in August, so if they only count whole years I will just miss out assuming transition in April 2015.

Any gen?

[Stuff]

If you play about with the calculator and move your enlistment date a few days either way you can see that the terminal benefits change so it would seem AFPS75 is based on days rather than whole months or whole years.

[harrier123]

Al,

Good to know you are thinking about me. I think I will look in to buying extra years.
Many thanks.

[Al R]

I don't think it'd be particularly worth it. Your call of course to delve further.

You can top up the period at the start of your service if you joined after the age of 21. So, if you went through Uni and joined at, say, 23 then you can top up the 2 missing years. If you served through until 55, job's a good un - you would have achieved maximum pension instead of maximum pension minus those 2 missing years. If though, you bought the two added years and then left at (for example) aged 40, you would then get a pro rata reduction of 15 years.

It might still be worth it for you, it might not. You might decide that at aged 40 for instance, the extra amount that you get from those added years to your early AFPS pension is only adding to your income tax bill and so you might want to spread your options a little. Why pay tax especially if you don't need to - especially if you're earning good money in civvy street and are at least a higher rate tax payer anyway?

[Al R]

No - you must do it before. If you're getting to the age where you're close to 55 anyway, it breaches the maximum 15% per annum that you can put in. What are added years perfect for? The young person who joined up a little late who can say with resolute certainty that he will stay in until 55 and that at 55, he wants complete and utter peace of mind that what he gets, although might not be more than exploring another option, is etched in granite.

Having said that, as we can see, what IS certain anymore? The days are gone when a career, pension etc had any sense of certainty and reliability.

Vin,

Missed your post - yes, you can buy part years.

[Melchett01]

I know that once you decide to buy the AVC extra years it is set in stone and you can't change your mind. 2 questions:

Why can't you change your mind? You can start / stop contributions to any other pension scheme, so why not this?

Given the impending pensions changes, would that be enough of a reason to be able to challenge the above rule that you can't stop once you have started?

What seemed like a good idea at the time now doesn't seem like quite such a cast iron guarantee, so I have on more than one occassion wondered what I might do differently with the AVC contributions if they weren't being paid into a scheme that is about to be killed off.