Pensions Review

[Seven of Nine]

A whole load of good gen has appeared on the Parliament Stationary Office site, regarding the Armed Forces Pension review. The minutes of evidence presented to the House Of Commons Defence Committee, given on 6 and 13 Mar, are particularly eye-opening - check out the views of the Armed Forces Pens Soc, the British Legion and of course, MoD.
Plenty of interesting satistics to chew over e.g. pension as % of final salary: ours - 48.5, Police - 52.8, MPs - 53.3.
Even more galling: Death in service benefit: us - up to 2x salary; Police - 5x salary; MPs - 4 x salary!!
Do you still believe the MoD when they tell us that we have one of the best pension schemes around?
Click here (http://www.parliament.the-stationery-office.co.uk/pa/cm/cmdfence.htm) to go to the site.

[MightyGem]

Depends how you look at it I suppose. The Mil pension is non-contributary.

The Police pay just over 11% of their salary into the pension. That's not into a pension fund, that's to pay the pensions of those retired bobbies currently drawing their pensions. To draw a pension immediately after they retire, they must complete 30 years, otherwise wait until age 65 (info from the bobbies that I work with).

[Seven of Nine]

MG,
Disagree about the non-contributory part. Our salaries are abated to take the pension into account - we pay for it just like everyone else (not sure about the actual figure, but an 8% abatement seems to ring a bell).

[Muff Coupling]

7/9, Agree...element of mil salary goes to scheme (X factor is abated before awards I believe, but may be wrong there. So contributions are "un-seen").

The real issue is the time its taken to get additional pay pensionable..well, for those deemed worthy enough to be selected for the PA spine anyway! BUT..bear in mind the smoke and mirrors used to achieve it..abating an element of flying pay into daily rates, the key is..how much is that "element" going to be?.Long served Spec aircrew, Upper Yardies and LE may need to get calculators out to see if it is worth going for!

Worth a read from bluntie land is the MOD Review of Armed Forces Pensions 2001 (more detail than Commons minutes)...watch out for soldier / officer pensions joining hands! Commissioning from from the ranks (especially Warrant level) may not be that attractive downstream, less gratuity.

[RedOnCut]

Ref current pension plot, any advice on Life Commutation for those who qualify -- Go for it ---Forget it etc.

[MightyGem]

So, just add 8% onto your present salary to see what your getting before your pension "contribution" is taken out. Still want to moan about how much or little you get paid?
:)

[Stan Bydike]

Red

Ref Life Commutation. At age 55 if you Life Commute I think you get about £15 for every £1 you commute.

So without re-investing that means living to 70 before the MOD makes a profit on you. I believe that statistically aircrew don't see their 70th so you are getting money out of the MOD that you otherwise wouldn't see. If you re-invest then that period is obviously greater even allowing for spending some of the principal each year.

I also believe, but would welcome confirmation, that a widows pension would be based on your uncommutated pension rather than the commuted one you actually took.

Also, the amount you commute is dependant on service prior to 1981.

All in all a good deal which is probably why it was stopped.

[MrBernoulli]

RedOnCut

I certainly intend to commute the max when I go. It gives you a large tax free sum instantly whereas your pension will always be taxed. Your pension is, of course, abated to provide the max commutation but when you reach age 55 it returns to the monthly amount you would have received at 38/16 had you not commuted.

Think of it this way - if you have a spouse or partner and you die in the first week after leaving at 38/16, the commuted amount is theirs tax free. If you go for minimum gratuity and max pension and the same unfortunate death were to occur, your spouse has the pension slashed to half and its taxable too.

Give PMA a call (I'm assuming you're RAF). Once a year they can provide you with an example of the summs involved based on your current pay rates. I think the figures will surprise you.

[BEagle]

About 2 years ago I asked for an illustration from PMA and found that with the max commutation I could get my sticky hands on about £90K tax-free plus a pension of around £17K per year. Pay rates have increased significantly since then - but I still wouldn't be getting a pension based upon my final salary, just on the 'basic' element - unlike a bluntie on the same take home pay who would receive such a pension..............

[only1leftmate!]

Are you 100% sure about the tax-free bit?

There is a tax-free bonus but I'm sure that the commutable element of the pension will attract tax at the going rate. Thats a big tax bill- especially if you've just blown the lot on sweeties!

[Gen. Bombdabastards]

For the best advice on service pensions I suggest you try and contact "The Forces Pension Society" 68 South Lambert Rd, London, SW8 1RL e-mail [email protected] or www.forpen.co.uk

Recently had the resettlement brief, Rtd Lt Cdr knows all about it. May give you advice to start with for free but will expect you to join for more detailed info. Failing that speak to someone who has had the latest brief.

I'm leaving soon and commuting the maximum I can.

[Whipping Boy's SATCO]

My wfe teaches this stuff and she says that its always best to commute as much as possible. I'll ask her in more detail once she has got out of the bath!

PS If you ever want to earn real money, join her profession.

[Dan Winterland]

Commuted pension is definately tax free.

I commuted the max last year. As to whether it's worth it - do the sums based on investing the commuted element either in a deposit account, or better still paying off your mortgage (therefore tax free) and compare them to the extra pension you would get paid (less 40% tax) and you will find you are better off commuting at today's interest rates. But surprisingly, not that much.

Of course, if you snuff it before age 55, your widow is definately better off.

[navbag]

I also confirm the tax free bit. I commuted the maximum a few months ago and it arrived smack on time thankyou very much!! (All accounted for of course!)
Also now in receipt of a nice pension too...That bit worked out nicely. However, it's all a bit confusing for the poor tax man, especially as I was on a double income for a while (you're allowed to on terminal leave and can do more with permission!). Your RAF pay / pension and new employment will be handled by different tax departments who refuse to talk to each other, so keep some aside for when they finally realise their error (despite much prompting!).

[lightbob]

Your pension will be paid by default with the standard rate of tax deducted. I was able to get the Ty Glas tax office to up the rate to 40% (how it pained me) so that I wouldn't be hit with a huge bill this year. Despite their ignorance they can view several records from different tax offices at the same time and connect your records.