FTRS Abatement, Index Linking and Commutation at 55

[Corporal Clott]

Anyone know/experienced what happens on FTRS at age 55 with abated AFPS75 in payment when the Resettlement Commutation period finishes and Index Linking is supposed to kick in?

Does Xaffinity Paymaster recalculate? Does only the Commutation sum get re-instated or does the Index Linking only work on the abated sum?

Grateful for a steer as decision crunch point approaches...

CPL Clott

[Mick Strigg]

If you are not already a member, join the Forces Pension Society and they will give you the answer as to what should happen. You can then compare this with what SPVA do and then take them to task, as they sometimes get it wrong!

[tailchase]

I hope that as the commutation is taken as payback of pension you were not entitled to due to going overthe pay/pension threhsiold that at 55 you simply get your full pension entitlement - can't see how you will get anything back.

[retrosgone]

Not sure I altogether understand the question - however. I was a regular who then went FTRS for 5 years before leaving the Service aged 48. I passed the 55 point last year and the following happened:

My regular pension started to be paid in full (it pretty much doubled because the commutation period ended and 11 years of RPI inflation was added).

The FTRS pension will only be payable from age 60 - and will include a pro-rata lump sum payment on that birthday. It will have been index linked over all that time since the initial quote/estimate you receive on leaving.

Hope that helps!

[Wyler]

My understanding (3 years of FTRS some time ago) is that you cannot earn any more or less than your last job/rank in the RAF. So, my guess is that any increase in RAF pension by passing the 55 point will be abated iaw the rules on earnings. Hope I am wrong for your sake.

[Corporal Clott]

Thanks for the replies. I'll try SPVA and Xafinity first as they're free - £30 to get a question answered by the FPS is a bit steep! I'm happy with everything else, it's just the "tricky Johnny" question of what happens at 55 if the Immediate Pension is abated and also reduced due to commutation.

I can see only 4 outcomes really:

1. Remain on abated pension with commutation deducted and no index-linked inflation increases on abated pension :{

2. Commutation deduction removed but no index-linked inflation increases on abated pension :yuk:

3. Commutation deduction removed and index-linked inflation increases applied to abated pension :hmm:

4. Commutation deduction removed and full index-linked non-abated pension paid :ok:

I always was cr@p at multi-choice but I hope it is 4 or maybe 3. Everything else would be sub-optimal...

CPL Clott

[Voxpop]

Quote
"I can see only 4 outcomes really:

1. Remain on abated pension with commutation deducted and no index-linked inflation increases on abated pension

2. Commutation deduction removed but no index-linked inflation increases on abated pension

3. Commutation deduction removed and index-linked inflation increases applied to abated pension

4. Commutation deduction removed and full index-linked non-abated pension paid "

My understanding is that the abatement just continues - so you will not notice that your commutation (loan) deductions (repayments) have stopped. The pension increases will be added on when your pension comes back into payment when you leave the FTRS.

[Corporal Clott]

Voxpop

I understand that the abatement will continue but why will the abated amount not be raised by CPI at age 55?

Furthermore, on the subject of Resettlement Commutation:

Abatement of Pension. In accordance with current Treasury rules, anyone in receipt of an Armed Forces pension will be liable to have that pension abated on re-employment. This means that individuals will be allowed to retain that amount of their basic pension which, when added to their basic pay on re-employment on FTRS, equals the basic pay that they were receiving on the
last day of regular service, uprated by the percentage of pension ncreases applicable to the code under which their regular pension was assessed. This abatement rule is not restricted solely to just FTRS personnel (it also applies to Military Provost Guard Service). In cases where the total remuneration is greater than the level permitted, the AFPS pension in payment may be abated or suspended. Where an individual has taken resettlement commutation and their pension in payment is subject to abatement in whole or part, a reduction equal to the amount of pension commuted will be made from their pension.

Now the "reduction equal to the amount of pension commuted will be made from their pension" should cease at age 55 - as you rightly say, it is a loan and not a part of the abatement reduction. I cannot see, from reading the regulations why this amount should be lost after 55 - If I hadn't commuted I would have recieved this amount after abatement. Again, should this reinstated amount not be raised in line with CPI?

I think I understand what should happen, I just can't find it written down anywhere or anyone that has experienced it. Has no one with a commuted AFPS75 pension ever served past their 55th birthday?

CPL Clott

[Lima Juliet]

Cpl Clott

That's my understanding but I too have not seen it anywhere in writing. Let me know if you find out, I'd be interested. :ok:

On the Forces Pensions Society (FPS), I read some poor advice at the time on whether I needed to leave for 30 days or not to get my AFPS75 pension in payment. Eventually the SPVA expert came good and I left one day and joined the next with AFPS75 in full payment. It would seem that as the 75 scheme had closed and was no longer open, the 30 day rule no longer applied. That experience left me slightly dubious of FPS' capability to deal with more complex pensions questions. However, that said, they are good at lobbying and also have helped significantly with advice for the Future AFPS.

I just need convincing that it's worth 30 quid!

LJ

[Corporal Clott]

I've had my answer from SPVA and it is as follows:

When you attain age 55, repayment of Resettlement Commutation will cease. Your service pension will revert to its original level of £XXXXX (from its current commuted level of £XXXXX - £YYYY where YYYY is your commuted sum pay back).

Annual increases will be added to the pension at that point.

If you remain re-employed in FTRS at that point, your pension will continue to be abated. The abatement will be deducted from your new level of pension.

The current level of abatement to your pension is £YYYY and it will continue at this same level throughout your re-employment, unless you change post, rank or commitment, wherein the abatement will be reassessed at the point of change (adjusted to inflation).

As an example, if you were age 55 today:

Your basic pension would be £ZZZZZ (which is £XXXXX adjusted by inflation)
Less re-employment abatement £YYYY
At this point you would recieve £ZZZZZ-£YYYY
which is raised by index linking and the removal of the commutation sum

Happy days, that would see my take home increase by £5k overnight in his illustration - it will be a lot more when I really do reach 55 :ok:

CPL Clott

[Lima Juliet]

Cpl Clott

That's excellent news mate. Given that CPI has been 3.1% in 2011 and 5.2% in 2012 then that will be a significant increase. If CPI averages 3% for the next 8 or so years then I will see my pension go up by £9k per year and also my £4.5k per year commutation ceased. That will be a £1200 per month pay rise on my 55th birthday - kerrching! :ok:

That is if the bankers and politicians haven't nadgered the country by then!

LJ

PS. Looks like you saved yourself £30 as well by not using the FPS!!! :eek:

[Jambo Jet]

Might be even better, when I believe that Abatement is abolished under the NEM pension, when we eventually get the details. Still I could be wrong on this one!

[Lima Juliet]

JJ

The 'no abatement' only applies to those on FAFPS15 and not AFPS75 or AFPS05. Therefore, the first individuals where 'no abatement' applies will be 22 years after 2015 - ie. those that are serving in 2037!!!

Not that generous really and I'm sure it is not what Lord Hutton intended!

LJ

[Lima Juliet]

By the way, has anyone else been dissapointed with the Forces Pension Society, or is it just me? I do know of one other that canx'd his subscription after the first year having only confirmed what he knew already; which for £30 didn't really meet the value for money mantra!

As I said before, I have had better experience by speaking to SPVA, looking at the regulations and the AFPS information documents.

LJ

[Lima Juliet]

By the way, has anyone else been dissapointed with the Forces Pension Society, or is it just me?

I guess it's just me and a mate then (after 300 views on this thread and no replies). Apologies to the people at FPS for casting overall doubt upon the competency of your organisation.

LJ

[Duplo]

LJ,

Posed several questions to FPS and little of any use back... there is better guidance on the internet and SPVA were good too...

[Lima Juliet]

Duplo

Thanks mate, that makes 3 of us. I don't feel so bad now!

LJ

[Grumpy106]

Cpl Clott,

Not sure if I am being a little numb here, but are you saying that once you get past 55 and are still employed as FTRS, the whole 'you cannot earn more than you did when serving' rule stops? They still take the abatement from your pension which they did when you were under 55 but you get the RPI pension rises and commutation sum back? If that is the case, it will make FTRS more attractive and help recruitment substantially!

[Corporal Clott]

Grumpy 106

Yes, kind of. If you have abatement applied then it doesn't change for life unless you change commitment, promote or change FTRS job. So if, like me, you join FTRS with a few years to run to 55 then you have your pension abated with resettlement commutation deducted as well, then your monthly pension will remain the same until 55.

After 55, the same abatement will apply at the same amount, but the resettlement commutation deduction will cease (which is about £4k for me) and then RPI/CPI will be applied to the whole new pension and awarded. So in effect only a small abatement worked out many years ago will still be deducted.

As LJ says, kerr-frickin-ching! That will see my salary rise by an estimated £10k on my 55th birthday - a happy birthday indeed.

Make sense?

CPL Clott

[Corporal Clott]

PS. And I've got it in writing from SPVA! :ok:

[Grumpy106]

Cpl Clott,

Makes perfect sense, thanks for the clarification. All I need now is the FTRS job!

[Tiger_mate]

This all sounds very complicated. If I leave at 55 and then undertake an FTRS contract to age 59, what in simple terms is the effect on both anticipated pension and tax free lump sum?

[Lima Juliet]

You can keep your lump sum but your pension will be abated if, when added together with your FTRS wage, you end up earning more than your basic salary in the regulars.

Abatement applies throughout your time in FTRS and will only ne removed when you retire. This post was all about those that have a pension in payment before 55 and how index-linking at 55 will occur and the cessation of commutation repayment.

I hope that helps?

LJ

[Tiger_mate]

Thank you - it is a minefield with opinion widely divided.

[Jambo Jet]

This all sounds very complicated. If I leave at 55 and then undertake an FTRS contract to age 59, what in simple terms is the effect on both anticipated pension and tax free lump sum?



You will not lose out. Lets say you leave regular PATOS service at 55 being paid £72k a year and join FTRS as a level 9 Flt Lt on enhanced rate flying pay.

So your pension plus basic pay cannot exceed £72k. ie £46K pay plus an abated £26k pension, plus £16k enhanced flying pay (specialist pay does not count for abatement).

A nice little £88k annual package.

[Background Noise]

£30 to get a question answered by the FPS is a bit steep!

A bit of a plug for the FPS (no personal connection) - I think you might find the FPS more value than just the one question, I certainly have.

Unfortunately, having something in writing from SPVA has been worthless in a number of cases recently. A lot of 're-joiners' were given incorrect information about aggregation of separate periods of service under AFPS75 and AFPS05 only to be told later that they could not be aggregated (This has now been reversed). A colleague who left recently, and timed his departure based on an SPVA pension forecast, was then told after leaving that it had all been wrong.

There is a huge amount of uncertainty at the moment as we haven't even seen out the effects of AFP05, and AFPS2015 is about to change it all yet again. No one is old enough yet to have left prior to the 55-point on AFPS05 and see what does or doesn't happen at age 65. FPS have recently had to take on an additional pension secretary because of the amount of work.

Just my take but money well spent for me.

[Lima Juliet]

Money wellsaved by me. I could have paid £120 for the 4 years of information that is easily found when you do your own research. Also, the one piece of information that FPS had given out that I read was wrong as it was out of date and they hadn't printed an update in Pathfinder magazine.

The letters I have from SPVA would be very useful to the Pensions Ombudsman if they turn out to be incorrect! So I don't see why they would not be held to account (apart from the pension forecast that comes with a warning that it might be incorrect). However, letters setting out policy are a different matter entirely.

Just my opinion, though, make your own...

LJ