AFPS - Hobson's Choice?

[Al R]

Has anyone heard any rumours of compelling SP to transfer over to a new and revised pension contract?

Whether or not the MoD compels ‘voluntary’ new AFPS contributions (unlikely in the short term, given the existing abatement and G’ment unwillingness to give pay rises - which would have to be introduced to compensate for the (effectively) loss of abatement?), might it be that offer of promotion or new contract would be conditional on accepting transfer into the new pension contract?

My interest is professional; if anyone would prefer to contact me off board, I would be grateful for any insight. Finally, rather ominously maybe, The Armed Forces (Pensions and Compensation) Act 2004 was amended to read..


(1) The power of the Secretary of State to modify an armed forces pension scheme may not on any occasion be exercised in any manner which would or might adversely affect any entitlement, accrued rights or pension credit rights of any member of the scheme acquired before the power is exercised unless—

(a) the consent requirements are satisfied in respect of the exercise of the power on that occasion in that manner, or

(b) the scheme is modified in the prescribed manner.

(2) The consent requirements are those prescribed for the purpose of obtaining the consent of members of the scheme to its modification.

[Pontius Navigator]

might it be that offer of promotion or new contract would be conditional on accepting transfer into the new pension contract

I presume you mean the new pension contract would be less attrctive than the old one? Would it deter some from taking promotion unless they planned to stay the course?

I guess that 'encouraging' some to turn down promotion because they intend to jump after a couple of years would be applauded by those who might otherwise not have been promoted.

Machiavellian.

[Al R]

I suppose it depends how far ahead people can see their careers developing.. in uniform and afterwards, out of it. The Regt is currently promoting some young FS -> WO; the reason being that as far as senior ranking promotions go, this is going to be 'it' for a few years now, and they don't want to be left with a skills void in a few years.

It could be, that the 'able thruster' who might give a couple of tours as a wg cdr but then see that there is no future after than might instead opt to remain as a sqn ldr and then bang out whilst he or she is still young. The reason? Because not only will the more senior appts have dried up, but yet another really good benefit of service will have gone if he/she stayed in and would have had to transfer to the new pension scheme.

That would then leave a slot for someone else, far younger and already in '05, to occupy if they intended to time-serve to 55. I suppose the flaw in the plan is that if it were true, they would have already released the news by now. Unless the administrative 'powers that be' are controlling the release over the next couple of years and are terrified of a sprinting mass exodus.

[Exiled]

Al,
I think that it will all depend upon what Hutton announces in his report before the next budget. I suspect that he will recommend that all public service pension schemes adopt an Average Salary model and that we will be no exception. That will be the starter gun for the real work as I don't think that Average Salary in itself need be a particular threat, the real issue will be in the extent the Government is prepared to fund the scheme and what will happen to members of the current schemes. I can't see any of these changes happening in the short term so, for now, I doubt that people need to worry too much.

[Al R]

Yes - I agree with you to an extent. I suppose HM Forces are fortunate in that any personal contribution is going to have to be offset by a compensatory pay increase, because salary is already abated to reflect the AFPS contribution - it would be a PR disaster to start dishing out pay increases after all these redundancies.

[Exiled]

I think that we are fortunate not to already have a system of personal contributions which means that their introduction would be far from straightforward. The abatement of pay is not quite so simple though. The deduction is taken from civilian comparator pay which then goes into the comparison calculation. As a result the deduction is not straightforward, and in the case of the last calculation of the beneficial value of AFPS a reduction in its assessed value from 7% to 4% did not lead to a pay rise. That said I think that there would be hell to pay were there not to be a salary rise in the event of its removal.

[Melchett01]

Al,

At my end of the trench, there are certainly rumours doing the rounds that a new scheme will be introduced, and which any future offers of promotion, changes in ToS etc will be tied to; the suggestion is that any new scheme will make AFPS 05 look positively generous. Furthermore, individuals will be on ToS that are essentially promote to wg cdr by 45 or leave rather than staying in rank on assimilation or as a sqn ldr until 55.

I can’t speak for everyone, but the whole pensions issue is creating a huge amount of uncertainty amongst my friends and I. The way we see things panning out, we are likely to be on a hiding which ever way we turn, hence the serious consideration being given many I know to cutting and running with whatever we have at 38 before that gets taken from us.

Assuming we stayed in and were fortunate enough to have the chicken bones and runes fall in the right order so that the old crone in Manning could make a guess about promotion to wg cdr, not only do we currently face the potential prospect of a tax bill under the govt’s new reduced lifetime allowance levels, but we also face having to go onto a new, potentially far less generous scheme to satisfy the private sector’s blood lust / mob-rule mentality to bring everyone down to the lowest common pensions denominator.

If we turn down promotion to try and protect what pension rights we have managed to accrue, also probably giving quality of life a bit of a boost by jumping off the career treadmill, we could potentially find careers prematurely cut short.

However, the apparent reluctance of anyone to pass on information is doing huge amounts of damage by breeding a climate of uncertainty and not a certain amount of fear for the future. The only announcements I have seen on pensions are multiple re-issues of the same DIN talking about the new life time allowance limits; it’s almost like Dave TV, but with pensions repeats rather than Top Gear. I’m sure many in the private sector would say welcome to the real world, but I’m equally fairly certain that if you’re the SH pilot carrying a cab full of troops to an insert, a FJ mate trying to do a danger close drop, the IntO trying to coordinate multiple conflicting assessments so the package commander can make a decision, the staff officer running the joint fires desk in theatre trying to deconflict intimate fire support for the insert that’s about to go in, that you really don’t want the extra worry.

So in short, yes, there are rumours – at least at this end of the trench. Yes they are hugely unsettling, and no we aren’t being told anything other than wait out.

[Al R]

Thanks for that - I would respond more fully, but I have to be at Sleaford Tech later today. However, look at the post I just plonked in Tony's thread (re: private sector pensions revaluations). Private or Public, when it comes to final salary pensions right now, it certainly looks like a race to the bottom.

Yes, '05 will look positively golden pretty soon, and there will be a lot of division - in effect, 3 different levels of service. No wonder they will want to thin out those on the more expensive '75. As you say, its the uncertainty - as an adviser, its difficult to advise on the wisdom and sense of clarity and guarantee of a(ny) Final Salary pension and AVCs if a) the rules surrounding the guarantee keep changing and b) the members have no control over them anyway.

[Al R]

Exiled: That said I think that there would be hell to pay were there not to be a salary rise in the event of its removal.

Yup.

In essence, the increased accrual rate of a Career Average scheme over a Final Salary scheme can only count in your favour if you plan on not getting promoted and are getting out. Hence my earlier point. The only doubt that I see, and taking into account the 2004 legislation, is whether or not enrolment into the new scheme is going to be at the end of a rifle barrel for everyone, or a fountain pen barrel for only those when signing on or accepting a new engagement/promotion.

EQPD magazine has a useful piece on pension reform btw (thanks PJ).

EQPD (http://www.afvg.co.uk/index.php/media-info-top)

Edit: Having spoken about this in jest previously, I have just read this with a sense of foreboding. A colleague I have just been discussing AFPS with (when it comes to crazy work place atmospheres, this place is really up there) has just handed me a copy of this:

Study wants public sector to enter Nest - Pensions Management - the magazine for pension & investment industry professionals (http://www.pensions-management.co.uk/news/fullstory.php/aid/5743/Study_wants_public__sector_to_enter_Nest.html)

To go from a gold plated pension to this would be a bit of kick in the slats - especially for those in their early 50s who would have to pick up the high early NEST running costs to cover initial overheads.

NEW REPORT: Self-sufficiency is the key (http://www.cps.org.uk/index.php?option=com_content&view=cpsarticle&id=517&Itemid=17)

http://www.pensionsadvisoryservice.org.uk/future-pension-reforms/national-employment-savings-trust-(nest)