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A DIN has been published to inform members of the AFPS who are considering applying or who have applied for Fixed Protection that they must inform SPVA in writing of this decision by 31st March 2012.
Now I can see my pension in the near distance but not so close as to be in touch yet, and a fastball demand to fix it now or never when I have no idea what that means is a worry. Is anyone able to put in laymans language the consquence of letting this go by un-noticed?
Intranet guys may find that:
DIN 2012DIN01-080: Pension Tax Relief – Lifetime Allowance – Notification Date to SPVA.
..works. It is applicable to all in the military regardless of colour of uniform.
If you expect your pension savings to be more than £1.5 millions when you come to take your benefits on or after 6 April this year, you can ring-fence your 'pot' to reduce your taxation liability (from April, the lifetime allowance (LTA) for pensions will be reduced from £1.8 milions to £1.5 millions). The lifetime allowance is the total value of pensions which you can accumulate without incurring additional tax charges. If you are going to exceed this amount, you can however, apply for Fixed Protection (FP), meaning that your LTA would be fixed at £1.8 millions (and not the revised, lower amount).
People who could benefit from applying for FP are those relatively close to retirement, or anyone who believes the HMRC's value of their existing pension provision might exceed £1.5 millions at retirement. In real-life terms, primarily, but not exclusively, this is of interest to people at 2/3* level - especially those who might be about to start a second career in civvy street. Options? Negotiate a second career pay and remuneration package that considers alternatives and isn't so pension based?
You do not need to already have built up pension rights of more than £1.5 millions to apply but you should expect your pension pot contributions to cease if you do elect to apply for FP. The impact of failing to apply for FP? It could cost up to £75,000 in tax-free cash (especially if you have a second, larger Defined Contribution scheme) while a tax charge would also apply on any monies that exceed £1.5 millions.
Not being at *starry* heights I am assuming it to be irrelevent. By "pension savings"; is this the perceived total value assuming longevity of life?
ie I my pension is 35k pa and I live for retirement plus 10 years are my 'pension savings' 350k (35x10) or am I looking in the wrong direction?
I am yet to do the resettlement finance brief which may cover such things, and thus far have lived in blissfull ignorance based upon the fact that a PAS pension is better than Joe Average is ever going to get.
In essence, thats about it, yes. The current figure that you're looking for is a Cash Equiv Transfer Value (CETV) - the size and value of your particular part of the AFPS pot. There is no statutory set of assumptions for establishing a CETV which is determined on a scheme by scheme basis (previously by an actuary to the scheme, now by the trustees). You are entitled to one free CETV valuation each year from SPVA which will give you a steer. Ona regular basis, the CETV is normally used for working out Pension Sharing Orders in the event of a divorce.
On another note, although there seem to be caps on combined tax reliefs (set at 25% of total income for anyone claiming more than £50,000 in a year), there are no significant change to personal pensions tax relief. This should certainly help people of advancing/middle years who have disposable sums of cash and who want to consider simple methods of adding to retirement income, and who don't want the bells and whistles of other esoteric investment schemes. The personal allowance increase to £9,205 is a massive leap too. I hope you've considered using your other half's allowance too, for your retirement income! Capitalising on £9,205 of tax free income from a (usually - without stereotyping!) non working wife is often overlooked.
Very interesting comments as always Al. However, I'm a bit confused about your statement:
"I hope you've considered using your other half's allowance too, for your retirement income! Capitalising on £9,205 of tax free income from a (usually - without stereotyping!) non working wife is often overlooked."
I was of the opinion that you can no longer transfer a spouse/partner's unused personal allowance to yourself. Or are you just recommending that investments such savings accounts are in your non-working spouse's name to make use of her (or his!) personal allowance?
A non working partner should consider having their own ISA of course, and personal pension to make best use of up to tax relief. For a non tax paying partner, £2,880 per annum may be contributed into a pension, made up by HMRC to £3,600 gross. A partner who works and makes, say, £10,000 per annum can save (with spousal help possibly) up to £10,000 gross (£8000 net).
One elegant solution would see someone getting max tax relief on the way 'in' to a pension plan and saving enough to be able to draw just under, or as close to the personal tax allowance on the way 'back'. So - as much tax uplift as you can from the state and £9200+ each year (in your partner's name) free of tax coming back at you both the other way.
The personal allowance increase to £9,205 is a massive leap too.
I haven't seen any figures yet, but I have seen a report that suggests that whilst the personal allowance went up to £9,205, the threshold for paying 40% tax went down by even more than the allowance went up and that the 40% tax band now starts at just £41,450.
If so, then I'm not sure exactly how much we will save. I would dearly love to know what this government considers the definition of weathy or rich actually is. Because the middle are yet again going to get hammered if this is the case. Oh to be a tycoon and have to be forced to pay a whole 20% rate of tax.
There are more and more higher rate tax payers being created each year - Labour started dropping the threshold to bring more and more people into it. On the plus side, that means more tax relief available to an increasing number of lower earners who want to make use it.
Soon, we'll all be affluent middle/upper class Higher Rate tax payers..
To calculate the capital value of your pension (in order to compare it to the Life Time Allowance) you multiply the pension by 20 and add the lump sum. Rule of thumb: if your pension is over £60K the LTA ceiling could affect you.
To calculate the capital value of your pension (in order to compare it to the Life Time Allowance) you multiply the pension by 20 and add the lump sum.
Thickie question warning - I assume the pension part is from the pension tables you get online? Only asking as a lot of the DINs talk about 'pension codes', the closest to which I can seem to find are the pension tables you get with the pay scales.
Its the pension that you will get each year and will be in the tables - also, tried www.mod.abc.co.uk? . Bear in mind that even if you did declare Fixed Protection, you wouldn't be immediately financially advantaged because you wouldn't be paid anymore even if you did cap your AFPS 'pot'. Right now, its not so much of a problem, but once the pay freeze is lifted it'll be too late of course.
Doctors and Consultants are leaving the NHS final salary scheme in noticable numbers - something which has historically been financial planning heresy. If projected high earners/achievers did place the issue of retirement income above anything else, leaving prematurely at an AFPS 'sweet spot' and negotiating a non pensions biased contract with a civilian employer might be a modern possibility.