SPVA Forecast

[Scotch Bonnet]

Ladies/Gents, for those of you that have recently left how accurate was your pension forecast? I have recently received mine and it is pleasantly better than the Calculator was predicting. Thanks.

[Biggus]

AFPS 75 or 05?

I suspect you are on 05.

[Lima Juliet]

2.5 years ago, my actual was better than forecast on the calculator.

[Capt Niff Naff]

I suspect that you have been 'dynamised' !! ( search under BMA GP pensions).
As you have not received a pay rise for several years, your pension would be worth less than one of your colleagues who retired prior to the pay freeze, but whose pension has increased by the annual CPI rate thus disadvantaging you for the extra years you have served. In effect your frozen salary is 'dynamised' up by the CPI increases since the pay freeze and that bigger 'dynamised' salary is the basis for the calculation of your pension. The calculator is unable to show this as I believe it to be a manual calculation by the gnomes at Glasgow.
Future increases of your pension will be subject to CPI.
CNN :)

[Scotch Bonnet]

Thanks Leon, correct Biggus 05

[Scotch Bonnet]

Thanks Capt, its amazing some of the things that go on!

[VinRouge]

Gratuity on 75 was about 3k better than the pensions calculator, exiting on PVR just after 16 point and after 2015.

[Biggus]

Capt N N has it in one.


The effect of "dynamising" on my pension calculation gives about an 8% increase as compared to the 'basic' calculation of simply time served vs current salary, largely because for one of my last 3 years in service the CPI figure was 5%.



The concept of "dynamising" for AFPS05 still seems to be relatively unknown out there, at least among my colleagues, despite a recent article on it by the Forces Pension Society. Indeed it wasn't mentioned in my resettlement pensions brief by the 'expert' at all.



Just another one of things that actually made AFPS05 a great pension scheme!





There's a brief explanation at the bottom of the page reached on following this link:

Dictionary UK | divorce, discretionary benefits, dual membership (http://www.sharingpensions.co.uk/glossary7.htm#text5)

[FFP]

Gratuity on 75 was about 3k better than the pensions calculator, exiting on PVR just after 16 point and after 2015.

Good to know, that's pretty much the exact situation I'm in (Out Jan 15) !

[Background Noise]

SB - what are your terms of service?

My forecast was better than the calculator, and what I eventually got was better than the forecast.

[Scotch Bonnet]

BG, PAS Level 35, 37 years served. :)

[Background Noise]

I'm guessing you have been on top level for a while? I was still on an increasing rate and the calculator assumes that the level you put in is what you have been on for the previous 365 days. If you have been on top level for a while it should be more accurate (I think).

Have you looked at leaving at your 55 point vs leaving early and the long term benefits? (Or are you already past your 55 point?)

[just another jocky]

Is the forecast automatic or do you have to apply, and if so, when & how?

Yes, I know I should know, but this is me trying to know. :O

[Spot 4]

I am told by Manning that a lot of 54 years olds are PVRing, so the pre 55 option is being subscribed to by SP.

However I cannot see how the decision can be so easy unless you are assured of a job after the military. Likewise; unless I am missing a trick, the 'equation' cannot take into account longevity in life. Broad estimates of mine reckon that leaving early is good if you are getting another job or likely to die before the age of 85.

If you want to put your feet up and live beyond 85 I reckon the advantages of leaving days or weeks early are diluted. I tackled an expert on this matter recently and he could see my point and did not have a robust answer to it.

[kintyred]

Top level PAS guys. If you intend to work beyond 55, leaving a few days before your 55th birthday makes a lot of sense. It will reduce your pension by about £10000 pa....which means that you'll only lose £5800ish after tax and NI. That's£58000 over ten years. In return you get another £110k gratuity at 65. Assuming inflation is 3% that means it's true value when you receive it will be about £80000. So that's just over £20000 extra in your pocket if you live to be 65. And thereafter the benefits increase over the guy who stayed to 55 because you can generate an extra £4000 a year from your additional gratuity.
For the less well paid it will still work if your post-retirement income takes you well into the 40% tax bracket.

[Background Noise]

Couple of points Kintyred, which make it even better than you described.

Even if you are not going to be a 40% taxpayer it works out more lucrative to leave early (on AFPS05). In fact even the gross figures are better. The second gratuity is also payable on death so if you don't make it to 65 you still get the money - well someone gets it. And the pension lump sum at 65 is index linked.

Do be careful though if you're interested in FTRS service as you would have to pay back some or all of the first gratuity and you would get no annual income (aka 'pension'). If you intend to FTRS leave at 55.

[kintyred]

Well, thank you BN, my wife will be extra chuffed if I shuffle off this mortal coil early! Are you sure about the second gratuity being index-linked?
On a personal note, wild horses wouldn't drag me to FTRS. It strikes me as getting personnel on the cheap by taking part of your pension away....no other employer would do that.

[Stanley Eevil]

The second gratuity at age 65 is definitely index linked. This was confirmed by David Marsh of the Forces Pension Society at one of my resettlement briefs recently. The eventual `pension`, which will be payable at age 65 once your EDPs stop, is also protected from inflation between when you leave the Forces and when it becomes payable so will be worth the same in real terms as your actual written forecast from SPVA.
It has been mathematically proven that it is DEFINITELY advantagous to leave early under AFPS05; especially if you do get another job and are a 40% tax payer. Also be aware that NICs are NOT payable on your EDP payments if you leave early.

[LFFC]

kintyred


You really have to be very careful before making sweeping assumptions like you have done in your last couple of posts. Everything depends on personal circumstances. For example, you state:


"If you intend to work beyond 55, leaving a few days before your 55th birthday makes a lot of sense. It will reduce your pension by about £10000 pa....which means that you'll only lose £5800ish after tax and NI. That's£58000 over ten years."


But what if you reinvest that £10000 a year into another pension fund? That would be tax free and potentially grow at 8 to 10% a year - even today. After 10 years that would be worth more than your £110k gratuity at age 65.


My advice would be to think hard and maybe seek individual advice - don't just follow the flow.

[kintyred]

LFFC,

You get the same gratuity at 55 that you can invest in a pension fund whether you leave a few days early or not anyway. I'm assuming AFPS05 for people in this position since anyone intending to stay until so close to their NRD has almost certainly chosen to opt for this scheme because it's so much better than than APFS75...sorry to make another sweeping assumption!

[Voxpop]

I did some sums for a Maj recently and he was over £35K (tax free) better off leaving just before age 55. If you are an FPS member, you can get a print out showing the figures in your personal circumstances. Forces Pension Society - Fighting for the Forces and their Families (http://www.forcespensionsociety.co.uk)

[Background Noise]

Slight update on the SPVA forecast vs calculator. If you have been at a steady rate of pay the calculator just looks at your latest pay. For someone leaving during a pay freeze it is quite possible that an earlier block of 365 days, uplifted by inflation, received in the last 3 years of service, could be better.

Kintyred, ditto re FTRS! That's what I left. And yes to the index linking.

It's all in here, page 11 has a schematic:

http://www.veterans-uk.info/medical_discharge_pathway/afps05booklet.pdf

Definitely worth joining the Forces Pension Society for anyone unsure, or with dependants. They will also double check your pension income once you are in receipt of it to check it's correct. Here's their piece on the early departure - you'll need to be a member to read it in full:

Should You Retire at 55...or Just Before? - Forces Pension Society Pension Issues (http://www.forcespensionsociety.org/how-we-can-help-you/topical-pension-issues/should-you-retire-at-55/)

[Scotch Bonnet]

Personal circumstances are what it is all about, one size does definitely not fit all. In my case leaving before 55 (on EDP 05) is a no-brainer given I have a job to go to. I think on balance EDP between the ages of 53-55 is the preferred option, if you ask MCM they will tell you this is the (current) case for PA spine people.

[Background Noise]

Absolutely - the earlier you leave the more you have to factor in loss of earnings for those last few years/months. Not a problem if you have a job or want to work. They say you will know when it is time to leave - I did.

It's also a bit of right place right time (at last!), since I missed out on FRIs due to age and really only switched to AFPS05 because (as we all thought) it was the best option if you intended to stay till the end. Having got there, it turned out to be even more lucrative to leave early.

How about inverse commutation? Another option open on AFPS05 - only appears to make sense if you live a very long time it seems.

Not sure what MCM is however?

[Scotch Bonnet]

BG, concur, MCM is Manning Career Management a Personnel centre outsourced to Billy Smarts Circus on behalf of the Army..

[Onceapilot]

One consideration with the EDP option is, if the tax rules change, tax-free lump sums could become ...taxed :uhoh:.

OAP