Originally Posted by
Easy Street [img]images/buttons/viewpost.gif[/img]
You will certainly not breach the annual allowance by accruing AFPS15 in a FTRS job: at 1/47 accrual you’d need to be on a salary of £1.88M to reach £40k input! What you might need to check is your lifetime allowance. Work out the value of your AFPS75 pension at the time you started drawing it, deduct this amount from the lifetime allowance (currently £1.0731M), and the remainder is the headroom you have to make AFPS15 contributions (at 1/47th salary each year) without becoming liable for more tax. It’s in the guide
here; the rule of thumb is that your total AFPS annual pension income would need to exceed £46.6k for there to be a LTA issue.
Originally Posted by
LoeyDaFrog
Easy - thanks for the steer that proved rather useful. I've known about the LTA (one of the few things I remember from the finance brf in resettlement) but not the details or how to work it out.
Just to point out that you can earn more than £46.6k
without breaching the LTA - here is how in the following example:
- You retired or were made redundant after 22 years as a Wg Cdr with a £25k immediate pension on AFPS75 in FY2010/2011.
- In 2010/2011 the LTA was £1.8M.
- On retirement, your amount out of the LTA is calculated as 20x £25k = £500k plus your £75k tax free lump sum. So total £575k, which is ~32% of your LTA at this ‘Benefit Crystallisation Event (BCE). So that still leaves you with 68% of your LTA.
- The day after retirement you start a Wg Cdr FTRS role that you serve another 18 years to age 60 - your combined benefits are £15k tax free lump sum and a pension at age 60 of £25k.
- At the time of retirement the LTA is £1.2M (estimate) and you have 68% of that remaining before you pay 55% tax on any lump sum over the LTA taken at the that point or 25% reduced monthly pension over that LTA prior to income tax. 62% of £1.2M is £816k, which is the remainder of your LTA.
- At the point of retirement your amount out of your LTA is 20x £25k = £500k plus £15k lump sum. Which is £515k and still leaves £301k left of the £816k LTA remaining.
- So you are well within LTA. However, you have £25k of FTRS pension, plus an Index Linked pension from your previous AFPS75 pension of roughly £35k (assuming inflation stays around 2%). Total would be £60k on retirement plus a handy £15k tax free lump sum. With no LTA breached.
So what am I trying to say? Those that were made redundant in 2010/11 that subsequently rejoin as a Regular or FTRS are quids in when it comes to AFPS15 as long as you stay to age 60. The accrual rate of 1/47th and the fact that you will career average at the higher rank that you rejoin at, means that AFPS15 is pretty lucrative too.
