Hi LFFC,
To an extent, yes. But its a bit more (potentially) costly than that. You mentioned the changes announced in October of last year. As you know, the
annual allowance for pensions saving was slashed from £255,000 per annum to £50,000 per annum. I was after the figures for other reasons though, because more importantly (perhaps!), the
lifetime allowance was also slashed from £1.8 millions to £1.5 millions. This will affect those working within the senior levels of the RAF or anyone aspiring to those dizzy heights. Handing your 1250 in wont help either; in Civvy Street pensions savings will still be made in our name by ourselves or future employers. Those payments will add to that lifetime allowance.
What to do? The nuclear option for any IFA is to consider a client leaving a Final Salary Scheme, and in today's compliancy and litigative driven environment even
discussing the matter has to be carefully catalogued and justified. The stigma of the NHS opt out debacle of 20 years or so ago still lingers and brings many old skool advisers out in a cold sweat, but whereas that tranche of opt outs was based on lofty aspirations of wealth growing based on forever soaring stock markets, this time, its different. Many well paid public sector employees could be far better off leaving their Final Salary schemes based on a current and very real, highly punitive tax regime reality, and by saving for their futures elsewhere.
I'm doing some work on this at the moment anyway, but if anyone is reading this and thinks it might affect them and wants a free steer, then look at this. Fixed Protection may still be applied for, which might help some and save them a packet.
http://www.hmrc.gov.uk/pensionschemes/lifetime-allowance/savings.htm
Any accrued pension pot over £1.5 millions will incur a tax charge of 55% on those surplus savings - so failing to consider and/or act could quite easily cost a high ranking AFPS scheme member a couple of hundred thousand pounds. Most senior serving officers should have other investments and savings anyway, and although many servicemen do become myopic and overly fixated on investing via their pensions for the immediate tax benefits (I certainly was), those benefits are in many instances, superficial and going fast. They might be short lived and in the long term counter productive, and could be achieved in other ways anyway.
All high earners need to diversify their strategy/portfolios and consider all options. There is not much point in saving like mad for a comfortable retirement if the approach is single stranded and potentially highly punitive anyway. Again, the single biggest benefit to any married couple where one person is not saving for their retirement, is to consider a personal pension in their name. They can have great tax uplift benefits going in, and when taking money out. We all have an annual income allowance up to which, we don't get taxed - many mil families don't use that benefit (usually, its in a wife's name).
edit: For the record, I am not suggesting leaving AFPS having read this. But stay up to date with regards to investment and retirement planning with your own bank/adviser, be aware of what’s happening right now and just around the corner - and always consider options that are right for you.. not the crowd. If anyone wants any info, then please feel free to drop me a PM.