New Pension Calculator

[Al R]

JTO,

You make some really good points – let me add to them if I might, from a different perspective; I agree completely that there is a tranche of officers which is in a pickle, but potentially, everyone is going to be in a pickle with their pension. The Lifetime Allowance changing again, to your detriment. The Lifetime Allowance is a limit on the value of benefits from your pension schemes – whether lump sums or pension income – that can be paid out without triggering an extra tax charge.

The Lifetime Allowance for most people is £1.5m in the tax year 2013-14. It applies to all the pensions you have, excluding your State Pension. In 2014-15 the Lifetime Allowance will reduce to £1.25 million. Will it affect you? Multiply your annual pension by 20, add your lump sum - what’s the number? Is it going to be over £1,250,000 (and that’s not even taking into account any post military civvy accrued benefits which may well bedefined contribution), are you considering individual protection from the Lifetime Allowance charge?

https://www.gov.uk/government/consul...lowance-charge

How does the new Lifetime Allowance of £1.25m affect you? Look at it this way. As it currently stands (at £1.5m) if you are on track for a final salary pension (with no separate lump sum) of more than £75,000 a year, or, a salary-related pension over £56,250 plus the maximum tax-free cash lump sum, then it will - you will incur a tax charge of 55% on anything that you benefit from (or crystalise). Note that benefits paid out to your survivors if you die also use up Lifetime Allowance.

I have just had a chat with the man at HMRC who is overseeing this latest consultation and asked him how it would affect members of a pension scheme where accrual is (nominally at least?!) non contributory. He was very nice and when he started suggested renegotiating an employment contract, even he paused mid sentence because he realised that renegotiation can’t happen with military personnel. This further latest reduction in Pension Lifetime Allowance must have an effect on anyone who aspires to the loftiest of perches and if you are one of those, its important that you get your head around this.

It makes saving a few thousand pounds here or there, with the very greatest of respect to those who are (justifiably) concerned, worried and annoyed by it, pale into insignificance – and is especially vital to those officers and airmen who are a) successful and b) joining companies after a successful military career and who DO have the opportunity to negotiate a bespoke contract. In other words, should your head really be turned by a (superficially at least) great group pension scheme which might turn out to be a poisoned chalice? It is also vital for those who become consultants – are you adding to a personal pension which is only going to present you with a tax charge of 55% when you wish to crystalise it?

Secondly, the pensions minister (Steve Webb) is starting to sound like a Discovery that has been trying to get out of the mud for ages and is only now starting to gain traction. About what? Defined Ambition pensions. Intended to reduce the difference between Defined Contribution and Benefit schemes and more ‘fairly’ (chortle) blur the boundaries of actuarial/investment/future etc risk between employers and employees, who is to say that this isn’t going to be the next big thing for AFPS?

Steve Webb: DB will be 'dead' without defined ambition | News | Money Marketing

AFPS, even in ’15 format, IS still ultimately unaffordable. If you’re looking at staying in for the long haul, stay light on your feet, identify your unique financial end game, look at the macro perspective and don’t become fixated about any one particular issue that is on your radar now – if the loadie is telling you that the crew microwave isn’t working, make sure you don’t overlook the wing falling off.

Sorry for being glum; it really depresses and annoys me – no wonder there isn’t a military trade union. Someone please ply me with alcohol at Waddington tomorrow night.