Monkfish,
You won't get any arguments from me about how military pensions are monitored and mismanaged. It was clear from outset the existing scheme would transition very, very quickly. And unless AFPS 19 (my name) is honest, we'll have an AFPS 25. The new scheme monitoring system is risible, a generally poorly qualified but very well intentioned sub committee reporting to a civil servant with overall authority who rubber stamps everything anyway. I struggle to sometimes keep up with pension legislation. How can someone who does it as a secondary duty cope? I don't mean to undermine it, but straight talk is needed, we are talking about the financial futures of hundreds of thousands of people - this is no time to pander to sensibilities.
In the real corporate world, it would not be allowed to happen. The set up makes the BHS trustee/owner debacle set up look positively watertight. I have zero faith in how the future of AFPS is being mapped out, it is a failed process. Should there be a federation holding the MoD and the trustees to account? You bet. I am working with former pensions minister, Steve Webb, next week, about overturning a situation which affects some deferred scheme members - a situation which should not have gone unchallenged, let alone allowed to happen.
You refer to AFPS 05 and 15. Currently, the government can simply change the scheme rules via secondary legislation - in effect, it passed a law to say it can change the law without too much hassle. It is correct to point out that abatement will not apply to service in AFPS15. But it's a moot point in many ways anyway. The Pension Ombudsman has very recently decided (this year) that the employer of a member with a Protected Pension Age should 'provide information about the possible adverse tax consequences of becoming re-employed after starting to receive (a) pension'.
If members have a Protected Pension Age (can retire before age 55, such as Mil) they can only take their benefits as authorised payments if they satisfy at least one of the additional following requirements:
1. Must be at least a six month break in employment
2. There has been at least a one-month break in employment and either the new employment is “materially different” from the previous employment or the scheme rules provide for abatement – that is, reduction of the member’s pension to reflect his earnings.
If neither condition is met, the member will lose his Protected Pension Age and all pension benefits paid will be treated as unauthorised payments anyway.
AFPS 05 of course, doesn't offer a pension income, it offers an EDP stream. What is the role of the income stream? Twofold, well.. three. To compensate for having to buy a home and for the loss of a career early on in life, and to provide income in retirement. I have to say, and this will be contentious, I can't have too much sympathy if you get to 55 or so, and are still making good money. The money has to come from somewhere, it's public money after all.
On the plus side, if you have a notional income of, say 25k from your pension, your HMRC relevant earnings to top up your retirement income with (for instance) personal pension contributions is reduced. If though, a larger component is salary instead of pension income, you can save more and get more tax relief. This is because pension income is not deemed to be relevant for the purposes of claiming tax relief. In essence, there's always a way to lawfully overcome any downside. Everyone's needs and circumstances are different, I'm just buying a floating hotel for a client, for instance, using a quite complicated pension scheme/ltd company set up.
Final point - I wasn't aware that abatement was a device used in industry.