Originally Posted by
Countdown begins
Easy Street sets out below that it’s not necessarily about the salary but about the rate of increase in pension?
I have heard that several times so I can get my head round that, but not why 05 or 05/15 isn’t too badly hit, if at all. perhaps because it’s not a pension but an EDP? Maybe at the age 55 point people on that will be hit then?
My first thought is that 05 and 15 both work on the principle that your pension is proportional to the average pensionable salary received across your career. A promotion will not make an immediate difference and the value of the pension increases relatively smoothly as your salary increases. Compare that to 75, where your pension is based on your rank at retirement (with a minimum requirement of 2 years in that rank). The effect is that the value of the pension increases significantly 2 years after each promotion. The ability to roll over up to 3 years'-worth of unused allowance helps to smooth this out a little but the liability for tax charges is clearly much greater under 75 or 75/15 than 05 or 05/15.
If we'd known back in 2005 that the annual allowance was going to be slashed just a few years later, many more of us might have taken the offer to switch to 05. That could turn out to have been a very expensive decision in my particular circumstances. I have no idea whether AFPS05/15 'EDPs' are exempted from the calculation, but it would really be twisting the knife if they were!!