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Service Pension Reduction

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Service Pension Reduction

Old 20th Sep 2011, 01:36
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Not Long..... As I work it, you have to first get your UK pension paid here then if that falls short of the Kiwi pension the govt here make it up to what you would get if you only had the UK pension. Its complicated and if you have worked elsewhere and have paid toward their pesion you have to get that paid as well, a friend worked in Canada for a couple of years and they have to get that paid first before she gets her Kiwi pension to top up the amount. If there is a way to get the money back from the UK govt and pay it to the NZ govt I would be interested to hear.
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Old 20th Sep 2011, 03:14
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fergineer - google the Special Banking Option at Work and Income
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Old 20th Sep 2011, 14:30
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Shak37, now why did you have to go and say that? You've got me worried now. 1959-73, Gross Pension £0.00. You don't really think they could do you? I mean, they wouldn't would they? Al? Al? Oh dear, oh dear, oh dear. Oh dear, dear, dear......
OMG.... You've got a 12 year+ golden handshake as well. Spend it all quick and declare bankruptcy.
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Old 20th Sep 2011, 21:19
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Question

Still don't understand the workings of this but are you better off as a result of getting the state pension or does the reduction to your service pension equal the amount you get from the state?
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Old 21st Sep 2011, 22:54
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This seems to be official MOD statement on this issue:

Guaranteed Minimum Pension (GMP) - Error In Calculation


The Service Personnel and Veterans Agency (SPVA) is sorry to have to inform Veteran Customers that an error has been identified in respect of a small proportion of Armed Forces Pension Scheme 75 (AFPS 75) pension payments. This error is in respect of the application of the Guaranteed Minimum Pension (GMP) element of the pensions of some 6,000 members of AFPS 75.

The error only affects 2% of the AFPS 75 pensioner community. Armed Forces Compensation Scheme (AFCS), AFPS 05 and War Pensions Scheme payments are not affected.

Usually, under Government Accounting rules, SPVA would seek repayment of any amount overpaid in an occupational pension scheme such as AFPS. However, in this case, SPVA are happy to inform you that GMP overpayments relating to this issue will not be recovered.

This error affects pensions administered by a number of government departments. The vast bulk of AFPS monthly payments, some 360,000, are unaffected. The error came to light some months ago and a full audit has since been undertaken to identify the scheme members involved along with the cause and effect. The issue affects pensions paid by a number of government departments including the Ministry of Defence. The process for ensuring that pension records include the necessary National Insurance contribution information has not worked effectively in all cases.
Full details here.
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Old 22nd Sep 2011, 08:13
  #46 (permalink)  
 
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endplay,

On the surface of it, yes - you get the State pension in addition to AFPS. But your State pension is deemed to have been taxable income, and it certainly goes towards the annual allowance that you are able to 'earn' each year without paying tax.

The difference is that (currently) your annual allowance at 55 is £7474, at 65 it is £9940 and at 75, it is £10090. The net result is that the older you get, the more you can receive without paying tax. Don't forget, if its best for you, you can defer taking your State pension and get a higher amount.

There are lots of pros and cons in doing that; for some people, it isn't the correct thing to do. Finally, it isn't what you earn.. it isn't even about how much you make, its what you keep.
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Old 23rd Sep 2011, 12:58
  #47 (permalink)  
 
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Pensions et al

Whilst your personal tax allowance increases at age 65, if your net annual income exceeds £24000 you lose £1 of tax allowance for every £2 of income until your Tax allowance reduces to the standard £7470. My RAF pension + state pension + income from part time work mean that my tax allowance will remain at the basic £7470!! So much for working for a pension and paying tax and NI for 50 years! If you have a net income of more than £100K - lucky you, the £1 for every 2 rule applies until your tax allowance reaches ZERO!! The £100K rule applies regardless of age.

I am due to receive my state pension next month and enquired of Paymaster what effect this would have on my 2 RAF pensions (I did a stint of FTRS after the age of 55) because of the Minimum state pension rules. To my surprise they had already done the calculations and the result will be a gross reduction of approx £110 pa. For comparison purposes I joined in 1966 and was just short of my 55 point when I transferred to FTRS for a further 5 years service leaving in 2005.

Hope these current facts help someone along the way
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Old 23rd Sep 2011, 13:38
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Old dog,

Always take proper advice, but you are absolutely (regretably) right. Hence the need to consider at least, a personal pension for the wife/husband/girlfriend/boyfriend/cat/dog. Anything to use up their personal annual tax allowance and not just yours. Its all very well, an alpha male banging flying pay like mad into an AVC (for instance) if he then gets taxed to hell and back on the subsequent larger income in retirement - especially when his wife has not had any pension/savings/investments in her name for the past 30 years or so.

Offshore Bonds too; although investment vehicles and subject to risk offer income which is not classified as income, rather, return of capital (up to 5% of Bond value pa is allowable, free of tax). They used to be the preserve of the very rich - now though, more an invaluable weapon in the relentless fight against George Osborne and the ginger rodent. Offshore Bonds; also potentially very useful for planning for a child's education, as you can allocate a nominee (the young adult in education) segments of the Bond each year, which they can then receive without a tax liability (limits apply) and which can go towards an education/food/housing/weed/beer/pizza etc.
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Old 23rd Sep 2011, 13:48
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Hence the need to consider at least, a personal pension for the wife/husband/girlfriend/boyfriend/cat/dog. Anything to use up their personal annual tax allowance and not just yours
An excellent demonstration of why a balanced portfolio is vital, and not necessarily balanced just across sectors but also across instruments. It's why I am sticking with the AFPS pension and putting what I can into stocks and shares ISAs. Assuming the current rules remain extant going forward, I will hopefully have a pension and source of tax free returns / income which will mitigate some of the rules which give with one hand and take away with the other.
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Old 23rd Sep 2011, 14:22
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One could also do as I did and marry a Lady whose income (and therefore Pension) is greater than your own!!
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Old 30th Sep 2011, 18:21
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Best day of the year to retire?

Peeps,
If one could choose the day of the year to retire, and thus maximise future income, is any one day better than another to retire on?
Is it better to leave on 31 Mar, 1 Apr or , say 5 Apr, to tie in with the financial year, or is it better to go on CPI/RPI day?
Any help would be appreciated. As usual I will sift the banter from the fact as I too know that a day out of uniform is a day wasted and, yesterday was always the best day to retire!
CNN

Last edited by Capt Niff Naff; 30th Sep 2011 at 18:22. Reason: Spooling orror making the post read rong
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Old 30th Sep 2011, 20:41
  #52 (permalink)  
 
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There are a lot of factors to consider and most depend on your personal circumstances. However, here are a couple of important ones:

With a pay freeze in force, your pension will only increase by your yearly pay increment - if you have any left; if not, your pension is frozen as well.
The last time I looked, the yearly increment was about 3% of basic salary (although it varies a bit). As inflation is running at about 4.5%, your pension will be losing value in real terms if you stay in. Anyone who reached their maximum pension scale 18 months ago and remained serving will have suffered nearly a 10% decrease in the real value of their pension by Apr 2013!

However, your pension becomes index-linked from the day you leave the Service. The next pension increase will be applied in Apr next year and will be based on the CPI rate announced next month. If you were to leave the Service today (with 6 months of the FY yet to run) then you would receive a pension increase of half of the CPI figure.

So on the face of it, if you've decide to leave soon, it would be best to get your hands on your pension as soon as you can. However, you might wait for a big pay rise in Apr 2013 (hence a big increase in pension), or you might gamble that inflation will fall below your yearly pay increment of about 3% soon and make it worthwhile staying in. But don't hold your breath..........
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Old 1st Oct 2011, 08:35
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LFFC,


"...With a pay freeze in force, your pension will only increase by your yearly pay increment - if you have any left; if not, your pension is frozen as well...."



That is so wrong that it shows you have a total misunderstanding of how the pension scheme works!!!!


Edited to add an example:

I have no yearly pay increments left, so am on a total pay freeze, yet in the next 12 months the value of my pension will rise by 3.2%! Yes, I'm still loosing out compared to inflation, but by nowhere near the amount you are suggesting.



My advice to anyone considering leaving is to take professional advice on the financial consequences, don't believe what you read on here, get from a man in the pub, etc, etc......

Last edited by Biggus; 1st Oct 2011 at 08:50.
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Old 1st Oct 2011, 08:42
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Originally Posted by Biggus
LFFC,


"...With a pay freeze in force, your pension will only increase by your yearly pay increment - if you have any left; if not, your pension is frozen as well...."



That is so wrong that it shows you have a total misunderstanding of how the pension scheme works!!!!
I thought the same, my pay is frozen but I have had 1 with 1 more to come PA increment. If I have misunderstood things I would be grateful for some more info please
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Old 1st Oct 2011, 08:52
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I should perhaps have said, "your yearly pension increment - if you have any left" - sorry if I confused you. Those serving on AFPS 05 will get an annual increment of 1/70th of their salary up to 35 years of service (on PAS, the maximum levels are dependant on your rank/trade). Those serving on AFPS 75 get an annual increment as published in the Pension Code tables up until 34 years of pensionable years of service.

Unless something has changed in the last couple of months, please explain what I've got wrong Biggus.

I agree about getting independant advice, as I said, it all depends on your personal circumstances.

That all said, the Telegraph seems to be running a campaign to take even those pension increases away from you!

When is a pay freeze not a pay freeze?

Last edited by LFFC; 1st Oct 2011 at 09:23. Reason: To add link to Telegraph
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Old 1st Oct 2011, 09:01
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Right then.....

I'm on the PA payscale, and have gone as high as I can. Therefore no more annual increments, and I'm on a pay freeze. However,.....

I have currently served 31 years (ish). So my pension is 31/70ths of my "final salary". A year from now my pension will be 32/70ths of my "final salary". Yes, the final salary in question won't have changed, but the proportion of that final salary that makes up my pension will have gone up - hence my pension has increased in value.

Now, going from 31 years qualifying to 32 means an increase of 32/31 (if it is easier for you to understand compare 32/70ths to 31/70ths as a ratio), which is 1.0322, or 3.2%. The year following that, when I go from 32 to 33 years, it will only be an increase of 3.1%. However, if I was younger, and say going from 25 to 26 qualifying years, that would be a 4% rise.

Hopefully I have explained that sufficiently well that it makes sense...
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Old 1st Oct 2011, 09:08
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I did say "the yearly increment was about 3%" and that things would depend on your own personal circumstances. Sorry for not being accurate enough for you, but yes, you've got the idea.
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Old 1st Oct 2011, 09:24
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My turn to apologise if I got the wrong end of the stick....

The point is, the only people who be seeing the value of their pensions decrease by 10% ish are those that have served 35 years on AFPS05 or 34 years on AFPS 75.

These will be a fairly small and select band, aged 52+ depending on how old they were when they joined up (for example, having joined older than 20 it won't effect me even when I get to 55 and retire).

Loss of pension buying power vs inflation is just one factor this select band will have to consider when deciding on what to do in future, along with job satisfaction, current earnings vs possible salary outside, etc.

However, as I said before it should be a very small group, and won't effect the majority of pprune readers.
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Old 1st Oct 2011, 09:40
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Yes, that's correct.

However, although it's not the original point of this thread, everyone serving should realise that a 2-year pay freeze, whilst inflation is running at 5%, means that the real value of their pay (and resulting pension) will have been reduced 10% by next April.
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Old 1st Oct 2011, 10:02
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Last post, then I'll let it lie.....


Say my pay was £70,000 in Apr 2010. With a pay freeze in place, it will still be £70,000 in Apr 2012. With inflation running at 5%, after the two years £70,000 will buy less, and the "real value" will have decreased by about 10%.

If in Apr 2010 I have served 30 years, my pension would be 30/70ths of my salary, £30,000. In Apr 2012 my pension would be 32/70ths of my salary, £32,000. Hence my pension has gone from £30,000 to £32,000, a 6.6% rise. With inflation running at 10% over those 2 years, the "real value" of my pension has decreased by approx. 3.3%. If I was younger it would have decreased by even less.

A pay freeze means that EVERYONE in the military will see their salary effectively decrease by the value of inflation. By contrast their pension will effectively decrease by an amount that will vary from the total value of inflation, for a small group of older people at the top end of the pension schemes, to virtually nothing for younger individuals who have recently qualified for an immediate pension. However, the value of the pension certainly isn't going up!


Just think what the "value" of pensions would be going up by if there was no pay freeze and inflation was lower! Which is exactly what was happening for the years prior to Apr 10.


At the end of the day the military pension scheme is a bl*#dy good deal!
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