Recruit and Train or Pay Bonuses and Retain?

[VinRouge]

Originally Posted by Lima Juliet

Bob Viking and High_Expect



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!

you’ve completely missed off the compounding from investing from year one. A pension invested from year one doesn’t equal the invested sum. Most pension risk assessed funds deliver around 5-6% p.a. Stick 20k pa in a spreadsheet and compound it at a pessimistic 4% over 22 years. That’s pretty much what my pot will be looking like at 60. That’s with a really decent salary (average 105k over 25 years), 2 business or first tickets per year, staff concessions and I won’t be dead of frustration by the age of 65 working for the MoD. Annuities are a complete rip off. 25% draw down at 170k and 75% remaining over 20 years (ignoring compounding on the pot) leaves you 26k p.a. Plus state pension from 67. That’s a lot when your airline rockstar wages mean you no longer have a mortgage and in fact will probably be downsizing. Final point on pay. Someone leaving at option or before has one additional distant benefit over someone waiting til option. That is the fact that you are delaying command by around 10 years. The delta in pay over those 8 years for longhaul is in the region of 300k in captains pay, albeit that salary is gross and therefore heavy taxed. Throw in a few years at the end as a training captain and the figures balloon even further.

This is all after having a nice life instead of sucking up your third no notice detachment in a year in the sandpit and only being able to afford economy Long haul. That’s if your wife hasn’t walked off with the milkman after your third no notice det and got your posting at short notice to the sceptered isle or Lossiemouth.

How much do you exactly need to live at 85, if you make it that long? The levels of stress on the front line will see to knocking years off your life, just as much if not more an airline job will. Not entirely sure the DU dust and the other crap (Basra’s GOSPs, et al) I was exposed to on tour is great for longetivity.

Personally, proud of my service but the RAF is currently a shell of its former self from when I joined. I refused to be continually flogged into the ground to carry other people’s mistakes when a harder line with incompetence would sort things out overnight.