Bob Viking and
High_Expect
When you say that all you need to do in order to match a Flt Lt pension is invest 150,000-200,000 then again, you should maybe revisit your maths (yes I do understand the principle of compounding). Maybe our definitions of a Flt Lt pension differ.
Yup, I again agree with Bob. So let’s say you are a Flt Lt that joined in 2007 under AFPS05 and plan to leave in 2027 under AFPS15. On today’s figures you could have a £7k per year EDP and a tax free lump sum of £45k at your 20/40 point. At age 55 the EDP would go up to £8.5k (with Index Linking applied to that amount over the subsequent 15 years that have passed), then at age 65 it would become £10k (again index linked from today’s figures). At age 67 that pension jumps again to £18k (again index linked for inflation from today’s calculated amount). Or you could wipe out that EDP tax free lump sum through reverse commutation to raise all of these figures by about an extra £2-3k per year for life.
A £200,000 ‘pension pot’ giving a guaranteed income according to the Prudential website (one of the more reliable companies) estimates:
Pension pot size at age 60: £200,000
Take 25% tax-free cash as a lump sum: £50,000
Amount used to buy an annuity: £150,000
To provide a guaranteed yearly income for the rest of your life of: £
6,800
So you have saved £200,000 over a 20 year period to achieve roughly the same as AFPS has at 20/40 - but the AFPS will pay you substantially more when you actually finish working. To get the same deal then the Govt Actuary Dept believe that you would need to invest £500,000(ish) to get the same sort of pension amounts in retirement as someone who served 20 years as a Flt Lt. To invest that as an airline pilot then you would need to stash away £25k a year - BA are one of the best when it comes to employer contributions, at 15% (just recently went up to this) so you would need to invest £21,250 per year for the whole 20 year period to get that Flt Lt equivalent pension.
I hope that made sense? Sometimes I wish I had known more about AVCs back in the late 90s than I do now, as I really should have invested instead of throwing it down my neck in beer on Red Flag!
Honestly, even the AFPS15 pension is way better. No, High_Expect, I don’t think you’re a freakin’ idjit if you have got one of those ME jobs with a £200k tax free ticket - but if you are working for less than £100k for a bucket and spade brigade, then I reserve my judgement!
