NEM Alignment

[Jambo Jet]

It is interesting that the PA NEM offers of alignment are now on the table and I have been given 28 days to decide whether to accept or not.
Is 28 days enough time for such a decision? What are the perceived benefits to remaining in the RAF for another 5 years, as opposed to the alternative where one could draw their pension and perhaps find gainful employment elsewhere (Babcock, MFTS etc) apart from the obvious one of a damn good wage? Is remaining in the easy option? What are your fellow thoughts on this offer? Is it better to leave at 55, receive your 75/05 pension, and then if remaining in the RAF is for you, accept an FTRS role on the new pension scheme?

Decision time!

[just another jocky]

We're all in different positions and circumstances so it's difficult but I would like to see some sort of confirmation of PA pay scale beyond 55. ATM, I am on Level 34 PA so would next years increment be the last I would receive so that my pay would effectively be cut for the next 4 years if I sign on?

Otherwise, having served over 30 years, I retain my 6-month PVR option (subject to service contingencies as ever), I remain on AFPS 05 and my pension increases. The loss of my immediate pension payment is an issue as we had planned to use that but otherwise I am struggling to see a downside, assuming I am happy to continue in full-time service.

The thought of an ADC job is enticing though (that's the 180 days per year job, not the bag carrier one) if I could persuade them to go for it.

[Al R]

Prescient. Let's assume a senior officer is in their mid 50s, on AFPS75 and has been offered extended terms to age 60. Bearing in mind that accruals on AFPS75 stop at age 55 or 34 years pensionable service and that transfer onto AFPS15 isn't the default setting if you have fewer than 10 years to push, does anyone know what happens?

The danger is, unless checked or opted out of, one's lifetime allowance may get breached if you slip onto 15 and continue to grow benefits for a further 5 years. The same applies to other ranks too, except it's 37 years service of course. The danger of breaching the lifetime allowance is less, but does anyone know what the drill is going to be?

[just another jocky]

Al, any advice on AFPS 05?

[Biggus]

Jambo,

The decision you will ultimately make is a personal one, all you can do (as indeed you are trying to) is gather as much information as possible and make your own choice.

However, when you describe one reason for staying in as "the obvious one of a damn good wage" consider the following. I recently retired at 55 on AFPS05, and my immediate pension net income was approx. 62% of my RAF net income just prior to retirement. In other words, I only lost 38% of income by retiring! Therefore, assuming broadly similar figures for yourself, one could argue that by staying in you are actually doing so for approx. one third of your current wage. You are working all those hours to only be better off, in comparison to retirement, by about one third of your net salary. As one illustration you're working all those hours to be better off, compared to retirement, by a JNCOs salary, a figure which you probably don't consider "a damn good wage". Yes, there might be other benefits from staying, for example continuing to accrue pension rights, or maybe job satisfaction, social life, etc, but I would argue that "the obvious one of a damn good wage" might actually not be so obvious at all!!


Just checked my records, and here are the actual figures:

Last months RAF pay, net: £4170
First months pension income, net: £2670

My statement above was slightly inaccurate, the pension was actually 64% of my previous RAF pay. Thus if I had stayed in (not an option for me at age 55 prior to the latest extensions to 60) I would have been working a 40+ hour week in the RAF to be £18,000 a year better off than in retirement. Hopefully this illustrates my point that staying in for "a damn good wage" is very open to debate!

You are probably correct in describing staying in as "the easy option"!!

[Sir George Cayley]

And someone can order you to get killed. And I don't mean your wife!

Get out, take as much dosh as poss and get a job at B&Q. You'll never look back.

SGC

[just another jocky]

Biggus - thanks for sharing that. Certainly a different and interesting perspective.

Bugger, I really do have a decision to make and the clock is ticking. :uhoh:

[Al R]

Same principle applies, JaJ. Don't forget that by staying in you continue to get protection benefits which might be useful. Biggus makes a very good point. Everyone different. It depends on your rank but research your options if the lifetime allowance drops.

[Jambo Jet]

Biggus thanks very much for your perspective.

Seems that those of us in this boat have a lot of thinking to do in the next 20-odd days. I know everyone has different circumstances, however if anyone gleams some interesting snippets that would help sway me, or any fellow Ppruner either way, then I would appreciate your input.

Definitely leaving this decision until the eleventh hour...

[Party Animal]

I'm also going to be an 11th hour man. The biggest factor for me at my late age though is next posting. An enjoyable flying job would keep me content. A god awful staff job requiring long hours would see me off. Problem is, I would like a cast iron guarantee of my next job before signing on and how likely is that in this day and age? What I haven't had chance to read yet is; do we automatically lose the option point at 55 if we sign on till 60? I know I can pvr after 30 years of service but that is more messy.

[Just This Once...]

I've not received my letter yet but it is going to be an interesting decision with the complications of AFPS75 to 15 thrown into the mix, let alone the potential pension legislation in the future. I've already hit the final PAS increment level so it would be a flat line for me for up to 17 years.

One of the elements that seems grossly unfair is that a PVR in the future whilst on AFPS15 will see my AFPS75 pension abated under PVR terms, even though the scheme is closed. Having served for over 25 years on the 75 scheme why should a PVR 5, 10 or 15 years in the future see this part of my pension pot abated when I did not PVR when serving under its conditions?

[Biggus]

PA,

Why is the PVR option more messy? I don't know if it will change under NEM, but it used to be that once you were over 50 you could PVR with 6 months notice to leave. Given the amount of resettlement you would be entitled to, and terminal leave, it comes pretty close to PVRing and then clearing your desk straight away! That doesn't seem at all messy to me.

I can't see any desk officer being able to make any guarantee to anyone prior to them making their decision, if for no other reason than at that stage the desk officer won't yet know how many will ultimately stay or go, and won't know how many cards he has to shuffle the deck and fill his slots.

Edited to add:


Ah - I've just seen JTO's post, maybe that's why the PVR option becomes messy?

[Party Animal]

Biggus - as I understand it, leaving at an option point entails no financial penalty. PVR'ing means an immediate loss of flying pay for the last 6 months of service. Ergo, if posted to an absolutely rubbish job, then it would be nice to have the option of leaving at 55 without cost.

[Vortex_Generator]

Just to reinforce Biggus's post, there is also the big fat lump sum to factor in.

[Sandy Parts]

Party - the original poster mentioned they are on PAS - therefore no 'Flying Pay' to reduce on PVR. I'm sure there are other financial implications but the flying pay one doesn't affect PAS (warning - information from circa 3 yrs ago - may be expired - I stand to be corrected if so :p)

[just another jocky]

Sandy, you're info is still correct - I'm PA and do not receive fg pay.

Also, I'm on AFPS05 and as I'm less than a year to my 55 departure point, if I do sign on for NEM, I stay on AFPS05, but as JTO, I would be on the top increment of PA so would effectively be taking pay cuts every year compared to others.

I'm also concerned also about lifetime contributions and whether this applies to AFPS05 and if so, how much is it and how do I calculate how much I've contributed???

[Party Animal]

Perhaps I should add to the OP's questions to state that all aircrew of sqn ldr and above are being offered an extension of service to age 60 - not just PAS.

Not too sure about NCA as I sit here but extensions are definitely out there.

[Lordflasheart]

From the OP -

Is it better to leave at 55, receive your 75/05 pension, and then if remaining in the RAF is for you, accept an FTRS role on the new pension scheme ? My question - Does an FTRS engagement generate an abatement (or abeyance) to one's service pension (or lump sum even) that is already being paid ?

I ask, because this currently applies to teachers who take their pensions and then later return to teaching as 're-employed pensioners.' Catches a lot of them out and the pompous 'prevention of loss to the public purse' as if teaching in retirement was fraudulent, certainly doesn't seem to justify the cost of the harassment and administration. I ask because all government pension schemes are doubtless aligned and ruled by the treasury.

From JaJ –

I'm also concerned about lifetime contributions and whether this applies to AFPS05 and if so, how much is it and how do I calculate how much I've contributed??? My limited, amateur understanding is that the current lifetime allowance (£1.25m ?) applies to one's entire range of pension provision - which might include multiple workplace pensions, private pension plans and AVCs, (but not OAP at present.) Furthermore the LTA will take into account the growth of all those funds where 'growth' applies. The exception is for Final Salary schemes where the LTA is 'back-calculated' by multiplying your expected FS pension by 20. That is to say, if one's expected FS pension is 50k (yeah I know ...) it is multiplied by 20 to give you a deemed LTA of £1m.

The 'other lot' are talking about a reduction to £1m LTA from after the May election – to fund something or other ... as well as a reduction of tax allowance on one's pension contributions. If you exceed the LTA there are whopping penalties. NB I believe that for some odd reason, LTA doesn't apply to MPs and some other privileged folk.

From the SPPA website -

Year Lifetime Allowance (£m)
2011/12 1.8
2012/13 1.5
2013/14 1.5
2014/15 1.25
And BTW there is an Annual Allowance (limit) for contributions to your pension funds. Penalty for exceedance.

And ABTW, if your future FS pension (that you might not live long enough to receive) is deemed to have increased by more than a certain amount (because of a big pay rise for example) you receive on account of it, a whopping additional tax bill on top of your PAYE, to be paid here and now. I have yet to find any specific rules, rates or examples for this tax because the amount depends on your individual contributions and those of your employer, and the tax is personal between you and your employer and HMRC. As a result, one cannot do theoretical calculations as one can with ordinary income tax. In effect, it seems to be a secret known only unto the victims.

The pension rules change with the weather. Just what you don't need for long term planning. It's a nightmare. All the above subject to health warnings. Happy to be corrected. ............... LFH

[Al R]

Flash,

Your understanding is very good. The only things I would add are that you need to add to the figure of twenty times your final salary pension, the tax free cash and that any pension benefits taken pre 2006 are calculated as twenty five times, and not twenty. If the LTA drops, then it starts getting serious for a lot more people. Transferring deferred benefits is banned in about 5 weeks, new guidance allows you to leave your private pension to absolutely whoever you want, free of tax. Not so with an unfounded FS public sector pension though.

Since August 2011, if you exceed your annual allowance (£40k) and incur a tax charge of under £2000 then 'Scheme pays' rules apply (search: Annual Allowance Scheme Pays August 2011 etc). It's tosh of course, you pay because you get a smaller pension later on. Anything more than a £2000 tax charge, then you stump up via self assessment. The annual calculation is more complicated and revolves around a multiplication figure of sixteen, cash, start and finish date salaries of a few years and the inflation rates for September.

I hadn't heard that about the Parliamentary Contribution Pension Fund. I shall rummage around. If so, another appalling aspect. Various aspects of The Judiciary Pension Fund though? Well.. no comment!!! Ed Moribund has suggested though, he will allow using four years unused allowance, and not as it is currently, three. Steve Webb, the pensions minister, wants to scrap the lifetime allowance completely. It's almost worth arranging to get divorced, take a Benefit Crystalisation Event hit reduction, and then getting back together with your ex in time for a few more years accruals. But they might take the money and then run off with your best mate. Which would be doubly annoying.

[circle kay]

Party Animal

NCA PAS within 5 years of exit date (55 or the new 35 years service) will be boarded in early April, (you didn't expect to be treated the same as the Os now did you)?

[Just This Once...]

My limited, amateur understanding is that the current lifetime allowance (£1.25m ?) applies to one's entire range of pension provision - which might include multiple workplace pensions, private pension plans and AVCs, (but not OAP at present.) Furthermore the LTA will take into account the growth of all those funds where 'growth' applies. The exception is for Final Salary schemes where the LTA is 'back-calculated' by multiplying your expected FS pension by 20. That is to say, if one's expected FS pension is 50k (yeah I know ...) it is multiplied by 20 to give you a deemed LTA of £1m.

The 'other lot' are talking about a reduction to £1m LTA from after the May election – to fund something or other ... as well as a reduction of tax allowance on one's pension contributions. If you exceed the LTA there are whopping penalties.

Serving to 60 on a mixed AFPS05/15 would see a flt lt PAS earn a £50k+ pension plus gratuity. If my understanding and humble maths is correct a reduction to £1M LTA would snare all officer aircrew serving to age 60. Even if the LTA remained at £1.25M it would not take that many years for inflation to see the vast majority of aircrew retiring at 60 to be hit by the LTA.

:uhoh:

[Al R]

However the maths does or doesn't pan out, and whatever the merits (or otherwise), you can opt out of AFPS membership don't forget.

[Melchett01]

But if you do opt out, am I right in thinking that would effectively be a double pay cut?

MOD would be unlikely to agree to alternative arrangements in lieu of your pension contributions as you might be able to negotiate in a civilian job? Therefore you'd suffer an immediate cut equivalent to the amount your salary is abated by to take into account the 'non-contributory' nature of the pension, and then a longer term cut as you would effectively lose out on the compounded growth of that 6% (?) per annum.

Or could you reclaim your abated salary and park it in an ISA or other investment vehicle?

[Al R]

You'd get nothing back, and you'd get nothing extra because the scheme membership is (notionally anyway) non contributionary. But as we know, salary is abated to reflect the accrual of benefits. I don't think there's a right or a wrong answer as everyone's needs are different, but it might be the lesser of two evils.

Interesting and potentially worrying too, for anyone reaching 55 shortly after the April/AFPS15 transition handover - if that person isn't transiting onto '15, it looks like they will be pension orphans. So given that it's AFPS scheme membership which offers the death in service benefits, is there going to be an issue there too I wonder?

It certainly presents a dilemma, and one that cropped up after chatting to someone recently and when reviewing a file; maybe voxpop could offer some clarity on how the scheme is going to handle this? Or is there something blindingly obvious that I've missed in how NEM is going to work for those extending from 55 to 60 and therefore, more likely to breach their LTA?

[just another jocky]

Al, how can we calculate how close we are to out LTA and how long it would take to breach it?

[Al R]

The LTA calc is simple. 20 times your annual pension and add the tax free cash (if AFPS is all you have). How soon will you reach it? It's a moving target that'll depend on what your final pension is when you leave.

[just another jocky]

Thanks Al.

That puts me very close if I sign on to 60 and continue with AFPS05. :eek:

[downsizer]

......................

[Selatar]

And of course whatever pay rises occur in the interim will play their part in closing the gap I presume?

[Just This Once...]

Yep, as I understand it so wage inflation will bring many more towards the LTA. Usually a threshold such as this would be indexed upwards but the political pressure appears to reduce the LTA over time, rather than increasing it.

[Fintastic]

So, I will be in similar position to the example at the top of the page posted by 'just this once...', yet the online LTA calculator running alongside the forces pension calculator indicates I'll be well clear of the threshold....hmmm.

With this being such a complex matter, I doubt there are many FAs that will be up on the detail in the timescale provided. Although at present I plan to take the offer, I only got my paperwork today and will be applying for an extension to enable me to seek appropriate financial advice and suggest others do the same. There are far too many repercussions and unknowns about the whole NEM to make such decisions in haste.

Additionally, if they have now extended the PAS by 5 years, then shouldn't they also extend the pay scale by the same amount.....just sayin'

[Lima Juliet]

There is a nice little guide on LTAs here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/347479/AFPS_Members_Guide_to_Taxation_of_Pension_Benefits.pdf

Unless you are in the rarified atmosphere of Gp Capt and above then the extra 5 years should be OK for most by my 'fag packet' calcs. Top rate of PAS might need some careful calculation too.

LJ

[Al R]

The LTA issue applies to more mere mortals too, and to all pension savings don't forget. But the essence of what you're saying is right. Taking it further raises the following issues.

If you're leaving as a more youthful Sqn Leader or Wing Commander and embarking on 20 or so more years in the 'real world', it's still something to be aware of. Currently, typically, a Sqn Leader might have used up 60% or so of his/her LTA - if you then factor in, the 'pure' addition of a few hundred thousand via an airline pension scheme until aged 60, you're there or thereabouts.

If the g'ment then further reduces the LTA to £1,000,000 in the next Parliament (I don't think it will, it'll be more likely to harmonise rate tax at a flat 30-35%), then retired Sqn Leaders and certainly, Wing Commanders on a normal pay branch, will need to look at the pros and cons of fixed and transitional protection.

If I were a senior officer interviewing for a new position and negotiating terms, it's certainly a contingency I'd be discussing. Namely, 'actions on' in the event of an LTA breach or imminent breach.

[Just This Once...]

My offer arrived in my inbox this morning with a deadline of 20 Mar. The email links to a few IBNs dated the end of Jan with a host of ToS changes too. I had not seen these and they appear to change the PAS ToS and PVR rights.

They don't make it easy do they.

[just another jocky]

JTO - deferred decisions are available I've been told so don't feel too pressured. My e-mail arrived 27 Feb and they gave me until 27 Mar to sign in or out.

I read those IBNs but couldn't find any significant changes to ToS for me. I can still PVR with 6 months notice. No further increments is an issue though.

Thing is, if they would but realise the number of us that would sign an FTRS contract for an ADC post (not bag carrier but a job share) they wouldn't be worried with offering us extra service. I'd sign up for ADC tomorrow!

[Backwards PLT]

I have also just received this today, although the letter states that I have 28 days from receiving the letter to reply.


I'm not sure I see many downsides - the 6 month notice to leave changes from age 50 to 30 years service (so 51 if you joined at 21) but that's about it. I realise that the pension issue for those that were within 10 years of 55 on 1 Apr 12 (I think it was 12?) will have a significant impact on some, but not for me.


If anyone hasn't run the scenarios through the pension calculator, do it now! As a mid 40s PAS Sqn Ldr on AFPS75 (soon to be 15), I can leave on my 55th birthday in 10 years or so, and get about 100k lump sum plus just over 29k /yr. If I do 5 more years I get a 69k lump sum and just over 46k /yr. 17k /yr extra for a loss of 31k lump sum is a big boost even taking into account that the lump sum is tax free and the income will be taxed at 20/40%.


I see that (20x46k)+69k is 989k so below the magic 1 million mark!


If anyone has seen any other downsides that I have missed I would appreciate it if you posted before I sign the form!


EDIT: Agree about the increments, though. They need to add 5 more, perhaps only accessible if you sign on to 60, but I don't see it happening.

[Just This Once...]

The 6 month PVR right seems to be in my favour as I joined at 18; so I guess I can bail at age 48 on LOS30 if the pain vs reward becomes too great.

[PostMeHappy]

Gents,

Heads up that the 6 month PVR now only applies to RoS 30 yrs+, and has been removed for age 50+ in toto, irrespective of any NEM acceptance.

[Could be the last?]

I thought the RoS 30 only applied if you signed up to the T&Cs associated with NEM/MEOS?? Therefore, if you didn't sign then you could leave at 50 on the original terms.....?

Does anyone know if Manning have offered PAS this year, or are they hanging back to see what the uptake rate of the allignment is before boarding applications?

[just another jocky]

I realise that the pension issue for those that were within 10 years of 55 on 1 Apr 12 (I think it was 12?) will have a significant impact on some,

What exactly do you mean by that? I wasn't aware of a pension issue and I was within 10 years of 55 on 1 Apr 12. :eek:

[Backwards PLT]

JAJ


I'm not an expert as it didn't apply to me, but a few years ago, when the new pension scheme was announced, those with less than 10 years to go were given "preserved rights" ie they will not transfer to AFPS15 on 1 Apr this year as everyone else will. I think this was seen as a good thing at the time, and I believe it still is if you leave at 55.


However one aspect of the 75 pension (not certain about 05) is that you stop accruing pension after 55. This doesn't matter unless you work beyond 55 - which NEM is introducing - making it far less attractive - the figures in my earlier post just won't be anywhere near right for someone in that position. When NEM was announced it was emphasised that those on "preserved rights" could not change to AFPS 15 even if they wanted to.


Hope that helps a little - some of the details above will hopefully be corrected by someone shortly, but the general gist is right.

[Just This Once...]

I wasn't aware of a pension issue and I was within 10 years of 55 on 1 Apr 12. :eek:

JAJ,

Not sure if it counts as an issue but your '05 pension is limited to 40 years of contributions. If you happened to have joined at 18 then you pension ceases to increase for service beyond age 58. If you joined in your 20s then you will not run into this.

[Axel-Flo]

Do you think the Pension Society dudes are on this like an A400 on Chips? If so could be the best £50 I will ever have spent....:ok:

[Al R]

High Spirits,

The state draws a fine line, it doesn't want to disincentivise too many people from saving via the pension wrapper. If it did drop it further though, it'd be likely to settle on £1,000,000. If it did, you could declare fixed or individual protection - but effectively leave AFPS. The downside to that is that you'd lose death in service benefits. Para 12 refers.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/347479/AFPS_Members_Guide_to_Taxation_of_Pension_Benefits.pdf

In respect of the MP's scheme, don't get me started. It had transitional protection at the 10 year point, as did AFPS, but the scheme trustees also gave themselves tapered protection for a further 3.5 years, to 13.5 years. This, despite the Brigadier in charge of army manning chopping a few redundees within days/weeks of getting an immediate pension because 'tapering wasn't an option'. Thread drift though.

[Al R]

Backwards:

If anyone hasn't run the scenarios through the pension calculator, do it now! As a mid 40s PAS Sqn Ldr on AFPS75 (soon to be 15), I can leave on my 55th birthday in 10 years or so, and get about 100k lump sum plus just over 29k /yr. If I do 5 more years I get a 69k lump sum and just over 46k /yr. 17k /yr extra for a loss of 31k lump sum is a big boost even taking into account that the lump sum is tax free and the income will be taxed at 20/40%.


I see that (20x46k)+69k is 989k so below the magic 1 million mark!

It might not apply to you specifically, but remember that if you opt for 'protection' and froze your pension pot, you have to take into account the annual CPI growth that would grow it (ho ho) - and any other post RAF pension savings. If it did drop to £1,000,000 you'd be a bit too close for comfort.

[just another jocky]

JAJ,

Not sure if it counts as an issue but your '05 pension is limited to 40 years of contributions. If you happened to have joined at 18 then you pension ceases to increase for service beyond age 58. If you joined in your 20s then you will not run into this.

Thanks m8, doesn't affect me. :ok:

[PostMeHappy]

(Follow-on to #38...)

IBN 13/15 revealed that the over-50s have lost any right to 6-mnth PVR and now need RoS 30 yrs+, with relevant AP 3393 Vol 1 changes etc

Totally see logic if you accept MEOS 60, but not if you 'do nothing' and expect to leave at 55

Wonder what other goalposts have moved in our T&Cs 'in the name of NEM' ?

[Onceapilot]

Some good info Gent's! Overall, it seems to me that most aspects of pension planning are vulnerable to future taxation changes!:uhoh: All your hard work might count for little so, just try to retire as soon as you can IMO!:ok:

OAP

[Tiger16]

Similar position to Backwards PLT - Flt Lt PAS, early 40's, AFPS 75. From playing with the pensions calculator, for those in a similar position to me there doesn't appear to be a financial downside to accepting the offer of service until 60. Compared to benefits on offer for leaving at 55, one's pension and lump sum grow gently with any additional service - until one hits 60 and the pension / lump sum situation chamges markedly as Backwards PLT alludes to (#36).

Point is - it would appear advantageous to accept the alignment offer, and nearer to retirement age calculate if-and-when one will breach whatever the prevailing LTA figure is at the time. Should one breach the LTA figure before reaching 60 (and for Flt Lt PAS it'll be pretty close!) then a 6-month PVR would still be an option, having served >30 years.

Unless, of course, I'm missing something! If any of the wise sages on this forum do spot a flaw in my logic, I and my colleagues would be immensely grateful if you would point it out.

[RandomBlah]

Tiger, you are missing something.

Leave before your 60th birthday and you don't get your AFPS 15 portion of your pension at 60, you get it at state retirement age. To illustrate this, run the pension calculator with you retiring at 60, and again retiring 1 day before your 60th birthday. The difference is eye watering. The treasury would probably be glad to see you PVR to avoid an LTA breach; they would effectively then start paying your AFPS 15 part of your pension 10+ years later than when you would hoped to have started receiving it!

[Just This Once...]

Similar position to Backwards PLT - Flt Lt PAS, early 40's, AFPS 75.

Point is - it would appear advantageous to accept the alignment offer, and nearer to retirement age calculate if-and-when one will breach whatever the prevailing LTA figure is at the time. Should one breach the LTA figure before reaching 60 (and for Flt Lt PAS it'll be pretty close!) then a 6-month PVR would still be an option, having served >30 years.

Unless, of course, I'm missing something!

Very similar position to me as Sqn Ldr PAS in my early 40's with what will be a mixed AFPS75/15. The potential LTA is alarmingly close and an early PVR to avoid it would see the major benefits of service under AFPS15 drift off to whatever state pension age becomes. Leaving the pension scheme before hitting the LTA is another solution, but as already said this takes you out of the 4 times death in service too.

Al R has warned a few times that arguably the biggest risk to our pensions and tax liability is future legislation. It seems to be open-season on public sector pension schemes at the moment and the unpredictability of it all does not sit well with the commitment the Service expects from us.

Another apparent bitter pill is the loss of part of an AFPS75 pension should you PVR at any point in the future, even if at PVR you are on a completely different pension scheme. I think this is grossly unfair but it only effects those with AFPS75 service, not those who joined or transferred to AFPS05.

It is all getting rather complicated and uncertainty does not mix well with military service or pension schemes!

[downsizer]

Another apparent bitter pill is the loss of part of an AFPS75 pension should you PVR at any point in the future

Can you elaborate on that, I've not seen that bit? Or is it officer TCOS only and doesn't affect baldricks?

[Just This Once...]

Officer only thing for all PVRs before the age of 50 (although that age limit may also change with the latest interpretation of our pension?).

[downsizer]

Gotcha, thanks JTO. Minefield eh?:sad:

[Albert Another]

If you don't accept the offer to 60 I'm sure that there will be offers to extend when you hit 55. This would allow you to see out your original TOS & top up a few years if you need to, with an eye on your LTA.

Can anyone see a catch? Apart from the obvious of assuming that they will need people to stay on in a decade or so.

[Could be the last?]

Did everyone who was offered the 'Allignment' get 28 days to make a decision? I only ask because I have heard that the PAS board has been delayed until the end of the month............! And has anyone successfully applied for an extension to the 28 days, to ensure all the T&Cs have been researched before making a decision? (My 'HR' department weren't that aware of the various changes, and stated they needed some time to read through the various APs etc)

[Onceapilot]

These terms seem likely to be a trap within the tax system even before they are introduced. Even some Flt Lt PAS @60 would bust a £1,000,000 LTA.
The balance is all wrong, you have to stay qualified, stay med fit, do what you are told, work hard and, not get killed for another 5years.:uhoh: And if you fall foul of the system, you can be out in 3 months with your pension delayed to state pension age...whenever that is!
Good luck folks!

OAP

[DITYIWAHP]

I'm a mid-40s Sqn Ldr PAS. From my experiments with the online calculator there seems to be little difference between retiring at 55 under my current terms or leaving on a PVR at 55 under the new terms. Am I just unable to derive truth from the calculator or does this sound about right? Thanks.

[Backwards PLT]

From what I've read and heard it appears as if there is no downside to signing up to 60. Some T&Cs and the start of AFPS15 will happen whatever you do. If you don't sign up you are taking the risk that they still want you at 55 - for no gain that I can see.

Viz - put your situation through the pension calculator. I'm AFPS75 and I get my lump sum (and a pension) whenever I leave. The AFPS15 portion gives you some when you leave as well as some pension, but not the full deal until State pension age (68 for most of those here - subject to change!!).

DITYIWAHP - I think that sounds about right.

High Spirits - run it through the pension calculator choosing the "not PVR" option. I don't think that you are any worse off (or better off) if you've signed on to 60.

Bottom line - signing up to 60 has no effect on your pension should you leave at any time before 55. It has a positive effect after that because you are working longer and a big benefit if you stay until 60 as that is the age AFPS15 is designed for - THIS IS WHAT I THINK, I COULD BE WRONG (it has happened before, don't tell the wife).

[DITYIWAHP]

Thanks Backwards,

Good to know that at least I'm not alone in my insanity....

[just another jocky]

...run it through the pension calculator choosing the "not PVR" option.

Never seen that option on the calculator before, where is it please?

[Backwards PLT]

A few pages in where you enter rank on leaving service - last question is "Will you be leaving on Premature Voluntary Retirement terms?"

[just another jocky]

Hmmm, not on the one I'm using.

http://i1358.photobucket.com/albums/q771/justanotherjocky/ScreenShot218_zpseibrosi1.jpg

[Lima Juliet]

JAJ

Are you on AFPS05 going to AFPS15? If so the calculator doesn't have a PVR option. Not my area of expertise, but are PVR rates for EDP the same as leaving at an option point - hence no option box?

Try running it with AFPS75/15 and you'll see the option.

LJ

[just another jocky]

LJ - 05 staying on 05 (<10 yrs to 55 on 1 Apr 12). In every calc I've done, and I've done a lot, I've never seen a PVR option on there.

[Voxpop]

Just for clarity, AFPS 05 does not differentiate between PVR and compulsory discharge. The only time there is an enhancement is when there is a Tier 2 or 3 medical discharge.

The difference between AFPS 75 PVR and Compulsory rates erodes over time and, after 28/29 yrs service, the differential has disappeared.

[Lima Juliet]

Voxpop

Thanks for explaining that. That now explains why JAJ doesn't have an option to select as there is no difference in pension between PVR'g and leaving at an option point where an EDP is payable.

Not being on AFPS05 then another bit of my knowledge is now complete as a line manager! :ok:

LJ

[Backwards PLT]

JAJ - that is the exact page I was talking about - I get an extra question. Thanks to Leon and Voxpop for explaining why.


Every day is a school day!

[Just This Once...]

Just for clarity, AFPS 05 does not differentiate between PVR and compulsory discharge. The only time there is an enhancement is when there is a Tier 2 or 3 medical discharge.

The difference between AFPS 75 PVR and Compulsory rates erodes over time and, after 28/29 yrs service, the differential has disappeared.

Vox,

Are you able to clarify what happens to PVR rates once some of us move from AFPS75 to AFPS15?

We have been told that a PVR at any point in the future whilst on AFPS15 terms will still be classed as a PVR from the '75 scheme, so the pension and gratuity will be abated.

Clearly we feel this is unfair but it is not clear how the abatement is calculated. As you would expect, we feel that it would be fairer not to suffer PVR abatement on the AFPS75 terms if I have never actually PVR'd whilst part of that scheme.

The published tables between PVR and Compulsory rates use Reckonable Service rather than years of service; ie mirroring the old pension rules which for officers ignores service before age 21.

The question this raises is that in Apr service on '75 will cease, as will our ability to accrue additional years to reduce the PVR abatement. As such is it correct I will be locked in forever to the PVR rates at the end of FY14/15 even if I PVR in 10 years time with (by that stage) 35 years of actual service?

[just another jocky]

Learning has indeed occurred!

Thanks Voxpop. :ok:

[Just This Once...]

...Mr Osborne will launch an "unexpected raid" on high earner's pension pots.

It says the lifetime allowance will fall to £1m from the existing £1.25m.

Pre-Budget speculation that the LTA reduction is a done-deal.

It is uncomfortably close to flt lt & sqn ldr PAS pensions and I guess it will hit more senior personnel quite hard.

[just another jocky]

With the NEM (MEOS 60) offer on the table, I did a recalc of my LTA and as a PA Flt Lt, at 60yo, I will be £10k short of the £1m and that's on today's figures. :eek:

[Guest_22]

And, interestingly, the one time only offer from DIB 58/13 to extend to 20/40 for those slightly younger has been reintroduced in IBN 15/15; wonder what the uptake will be from this re-attack?

[Al R]

Indeed, a done (http://citywire.co.uk/new-model-adviser/news/osborne-tipped-to-cut-lifetime-allowance-to-1m/a804200?re=33269&ea=316849&utm_source=BulkEmail_NMA_Daily_PM&utm_medium=BulkEmail_NMA_Daily_PM&utm_campaign=BulkEmail_NMA_Daily_PM) deal it seems. Currently, at a LTA of £1.25 million, active members of most defined benefit or final salary schemes will be affected if their income at retirement exceeds £62,500 (the deemed value of a DB scheme is 20 x the pension).

However, members of public sector schemes such as AFPS will currently be affected if their projected pension exceeds £54,347 net of gratuity (20 x the pension PLUS the tax free cash of 3 x the pension). If the LTA reduces to £1 million of course, so too, does the threshold. Pension protection can either be Fixed, or Individual. If you're getting a new job post military, and if you think you're going to breach the LTA then negotiate a different remuneration to a pension.

Funnily enough, I saw a client this morning , and we're diverting pension savings away from 'his' personal pension in anticipation of a breach, and squirreling more into 'hers'. He's the major bread winner. The new upper class, it seems, is the middle manager and consequently, pension apartheid gathers pace, if ever there was declared intent to do away with the public sector pension need we require more evidence?

It isn't what you make, it's what you keep -

https://www.moneyadviceservice.org.uk/en/articles/the-lifetime-allowance-for-pension-savings

http://www.hmrc.gov.uk/pensionschemes/ip14online.htm

[Voxpop]

Sorry for the delaying in responding to the point about how the PVR table is used - but I hope the following is useful.


Let's say you have 18 yrs on AFPS 75 and another 8 on AFPS 15, at which point you are PVRing. Your AFPS 75 benefits will be calculated on your rank for pension and using the Pension Code table in operation at the time you leave.


They will look at the 26 yr PVR rate and your pension will be based on 18/26ths of that rate. So, effectively, you are building up time against the 'break even' point where Compulsory and PVR tables merge.

[Just This Once...]

Thanks Vox. Any comment on the apparent unfairness of suffering PVR abatement when actually serving under AFPS15 terms of service?

[Onceapilot]

Quote Al R... "It isn't what you make, it's what you keep -"

Quite so Sir and, I would also venture.."it's what you get to enjoy". At age 60, 5 years is likely 30% of your active life remaining, you probably reached the 40% tax threshold on your pension at age 55 anyway and, the Gov.UK will most certainly have means-tested the state-pension etc!:uhoh:
Also, PAS Flt Lt/Sqn Ldr will probably be working at the sharp(dangerous)-end, till the end!:eek:
Don't trust me though, take professional advice!:ok:

OAP

[just another jocky]

According to a recent briefing, insurers claim officers' average lifespan was >84 yrs, and that was 8 yrs ago. Could easily be 90 now so well worth upping the pension a little if yr able! :ok:

[Onceapilot]

Great news JAJ! Why not work till 70?... As I said, take professional advice!

OAP

[Al R]

Just another Jocky,

I think what you were trying to say is that comparative mortality illustrations for officers predict 88% for S1NXA, and the same for other ranks runs at 118% of S1NXA?

Apologies, but I've been wading through the latest long term actuarial assumptions of AFPS, post April 2015. I'm afraid the government's conclusion is we're all going to die. Doomed I tell you. :uhoh:

There are some interesting predictions about the converging growth rates of pay between officers and ORs too.

[Al R]

Reducing the pro rata future capital requirement for an officer's pension?

I can't post the picture directly, but it would appear that in the future, pay progression for OR is projected to increase at quite markedly a different rate, ahead of wage inflation and compared to that for an officer. The twin peaksesque rate of change seems to spike in about 5 and 20 years. The dulling down effect of NEM seems to kick in after that.

https://twitter.com/raf_ifa/status/578113103486808064

[Voxpop]

Hi Just This Once.

I suppose it is the down side of protecting your rights in the old scheme.

The plus in AFPS 75 is that your benefits are calculated at the rank for pension and pension code for the proportionate length of service. The negative is that the rules for PVR remain.

[just another jocky]

I think what you were trying to say is that comparative mortality illustrations for officers predict 88% for S1NXA, and the same for other ranks runs at 118% of S1NXA?



Al, I definitely wasn't trying to say that....because I have no idea what it means! :}

[Just This Once...]

Apologies, but I've been wading through the latest long term actuarial assumptions of AFPS, post April 2015. I'm afraid the government's conclusion is we're all going to die. Doomed I tell you. :uhoh:


I took it as good news as I am no longer due to cork it at 86.9 years old and now soldier on till 91.2 years old.

[Just This Once...]

Although this bit was ominous:

4.10 We note that there is a possibility that changes to employment patterns in the Armed Forces as a result of deployment characteristics and the introduction of the 2015 scheme and New Employment Model may affect the rates of mortality experienced by future pensioners.

:\

[Al R]

But it won't affect anyone's career path though. Honestly.

https://twitter.com/raf_ifa/status/578136208456486912

Just another Jocky,

Chats about discount rates on future capital requirements can be quite interesting. The evenings fly by.

[Melchett01]

Apologies, but I've been wading through the latest long term actuarial assumptions of AFPS, post April 2015. I'm afraid the government's conclusion is we're all going to die. Doomed I tell you.

Eh ..... What? When was that little caveat slipped in??? Nobody told me, I've made plans!

[Al R]

It's scuppered my extension too I can tell you. :mad:

[London Eye]

LTA reduced to £1M. Start the engines...

[RandomBlah]

Yep, that's pushed me further towards the exit door, if that was possible.

[RandomBlah]

and with the LTA not index linked until 2018, that effectively reduces it to circa 900K!

[Just This Once...]

According to the pensions calculator and the x20 factor plus lump sum formula my PAS pension virtual pot is worth £1,033,437 at retirement.

With no index linking until 2018 the amount above the LTA will only increase, so it looks like I will be one of those hit by this rather punitive 55% tax rate.

Or I could leave early….

[Just This Once...]

…but if I leave a year earlier my virtual pot is apparently worth even more (!) and currently stands at £1,057,169 - albeit a good part of it is deferred to state pension age.

This is all rather complicated.

I need Al R to make sense of it all.

[Al R]

JTO,

You can consider the merits of Protection..?

https://www.gov.uk/government/publications/pensions-individual-protection-2014

On that first prediction, it looks like your pension will be cut by £712 or so pa.

[just another jocky]

Al, IP 2014 is only available for those who already have >£1.25m contributions into their pension pot. I guess that rules out most/all of us here if we are talking about just breaching the £1m mark during an extension to 60yo???

Quote from IP14 in your link;


Individuals who have pension savings of greater than £1.25 million on 5 April 2014 can apply for individual protection 2014, providing they don’t have existing primary protection.

[Al R]

No snags, that was to demonstrate the principle. HMRC will roll out a new series of Protection for the revised reduced rate.

[Melchett01]

I suspect my constantly delayed membership of the Forces Pension Society has just inched its way up the priority list.

I suspect it's not just those on PAS that need to be concerned. If you're 30s/early 40s and either potentially looking at wg cdr or taking an option with a view to a potentially well paid second career then protection might be something for all of us to consider. In terms of a life time allowance, as I've surprisingly discovered, even a mere sqn ldr pension gets you close to half the new limits, whilst the added effect of compounding returns over say 20-25 years in a second pension may just take you over the line.

Definitely time to start talking to people that understand the ins and outs of all this. For now though, I think I'll be thinking more of ISAs than SIPPs to top up the pension.

[Onceapilot]

It seems to me, that these pension taxation "traps" are primarily designed to claw back high-endish future public sector pensions. True highly paid (civi) jobs will continue to pay more during employment, leaving the "golden" public pension a thing of the past. :uhoh:

OAP

[Melchett01]

High Spirits,

Al R posted a link to the last HMRC publication on Protection - it's a few posts back.

I would envisage future protection being different in detail but similar in principle, you might get at least an idea from it. I'm thinking similar thoughts as to whether I might need protection looking 25+ years down the line, so I will be keen to see what they say following these latest changes.

[Just This Once...]

It's a real shame that AFPS15 did not include some flexibility when it came to things like the LTA. An option to cease pension accrual whilst retaining death in service benefit would be one idea. The other would be to gain additional income or other benefits if you opted-out of the scheme.

Fat chance I know.

[Willard Whyte]

I think one can only apply for protection if one's pension pot is already in excess of a new, lower, limit. If it accrues to more than the limit after its introduction then c'est la vie.

i.e. if your pension pot is >£1.0M and <1.25M when the £1.0 million cap comes in to place then you can protect it. If it's £999,999.99p at the time of the new limit, and still accruing, then you're 'stuffed'.

If it continues to accrue then of course your pension will still increase, but anything in excess of the limit will be (heavily) taxed.

[Al R]

JTO,

You can opt out if you wish. Nuclear option though, take advice.

[Al R]

There are two types of protection, fixed and individual. I wouldn't apply too soon, in 2008/10 (I forget) it was raised to £1.8 million. Applying for, and receiving the incorrect type of protection might well limit your options in future. I think that it's something that you have to be acutely aware of, especially if you get out at an option point with an IP, and have a further full career infront of you.

If it appears that you're imminently about to breach it, or you will have, then HMT/HMRC will promulgate the new series in due course and in plenty of time for savers to make an informed decision. If you have already breached the £1.25m limit, you are going to be limited with your options. But if you have a glittering second career infront of you (Consultants stepping into the NHS for instance) it's still well worth reviewing.

Someone asked me about the Annual Allowance. It has remained the same, but HMT has form. The way that it is revalued and therefore calculated can quite easily change (currently, a multiple of sixteen is used). That will mean many more can breach it even though the headline figure remains a constant. Ref Forces Pension Society, yes, absolutely it's a good thing to consider (I first joined it 15+ years ago when I realised I was about to get screwed).

If you are worried about breaching the LTA post mil, go onto LinkedIn and ask anyone if they have negotiated alternative remuneration. Out of interest, I posted this earlier if you want to monitor the thread.

Remuneration in lieu of employer pension contributions.

The reduced Lifetime Allowance (LTA) for pension savings will surely impact many reading this. Some of you will also exceed the LTA once you leave the military for a second career even if you don't breach it before, via AFPS.

Has anyone got any practical experience of negotiating separate remuneration terms in lieu of pension payments that you could share with us? The LTA of course, could also increase in the future; recently, it was *raised* to £1,800,000.

uk.linkedin.com/in/alastairrush

[Just This Once...]

At the moment I can see no advantage in leaving the scheme at any point as I presume I would be still accruing benefit, even if some of my pension income is taxed at 55%?

[Willard Whyte]

JTO, At the moment I can see no advantage in leaving the scheme at any point as I presume I would be still accruing benefit, even if some of my pension income is taxed at 55%?

I think so, particularly as a forces pension is non-contributory. Where it might make sense to reduce one's pension contributions is with a post-mil career voluntary contribution scheme, if the total of both (or more) pension schemes edges towards whatever LTA is in place.

[Party Animal]

Meanwhile - back to NEM and the offer of extension to the age of 60. What is the scuttlebutt on how many took the offer? Was there a flood or a trickle at a base near you?

Similarly, how many applied for PAS a few weeks ago?

Just interested :hmm:

[just another jocky]

Apart from one, everyone I've spoken to says they can see no reason not to sign on.

[MechGov]

The counter argument to signing on is, leave at 55, you will probably live longer. You won't be effectively working for 1/2 salary and you get your gratuity to invest. Oh, and you get to watch the train wreck. If you want to work after 55 you can find a firm that gives a toss about its people.

[camelspyyder]

Would I do 5 more years?

For only 10k on the lump sum and 3k on the pension - I think not!

Mostly because the pension freezes after 3 years (40years max on AFPS 05)

No, Even if this last tour turns out to be fantastic, I'm offski for sure at 55, or maybe 54.5.

[just another jocky]

The counter argument to signing on is, leave at 55, you will probably live longer. You won't be effectively working for 1/2 salary and you get your gratuity to invest. Oh, and you get to watch the train wreck. If you want to work after 55 you can find a firm that gives a toss about its people.

That's one perspective.

For me, it will provide continued income at a time when I can finally enjoy it without giving most of it to the kids, and whilst increasing my pension. It also means I can see what the train wreck actually means for my particular part of the air force and if I don't like it, I can leave within 6 months. I can also leave (PVR) and join the Reserves without having to give back any money, unlike currently.

I don't see a down side for my particular circumstances.

I'm struggling to find any employer who would give me enough money at my age to top up to what I'm currently getting. Plus the stress of learning a new job and actually having to work for a living.......hmmmmmm.

Each to their own.

[Voxpop]

Quote:

"I can also leave (PVR) and join the Reserves without having to give back any money, unlike currently."

If you take up an FTRS or ADC job, there could be abatement of pension. If you join PTVR, you would really have to put some hours in to see your pension abated. Your pension lump sum is safe whatever you do.

[Party Animal]

Seems like a mixed bag then. Apart from Camelspyder, I know of at least 2 other 50 somethings who are not accepting the offer. Their reasons are that they have both had enough and are just going through the motions till 55. There are no enjoyable staff jobs out there - just hard work and long hours. As for flying, it's just non stop ops and time away from home. Very few people seem to get away on sexy exercises with good deals attached anymore.

[Biggus]

It's a matter of perspective. Many of those still serving just see a continuation of what they know, the safe option, a good salary (most don't appreciate how little money they are actually working for - see post 5 on this thread) and don't believe their skills are appropriate outside for them to find gainful employment.


The vast majority of those who have left can't see the problem, don't look back, have a better life out than in, and are amazed in hindsight that they were at all reluctant to leave in the first place.


Those that have left the military, especially if its recently, can still remember their thoughts, feelings, concerns about leaving, and so can appreciate the position/dilemma of those still serving. By contrast those still serving can't really appreciate what it's like to be actually be out, as they have no experience of it.



At least that's my perspective....

[North Front]

I have turned it down... Logic as follows:

1. Minimal addition to pension. It freezes for me at age 58 (40 yrs AFPS 05).
2. Limited number of attractive jobs left... Esp as I will effectively be working for half pay.
3. I have to leave eventually, why not make a start at the rest of my life?
4. 37 years is enough in anyone's money!
5. No guarantee after SDSR15 that there will be jobs for old farts to 60 anyway.

With less than two years to go it is a bit scary but I am already getting enough of a picture of what lies beyond to look forward to it.

[just another jocky]

You could say it's working for half a salary, or you could say it's actually having to work (for once) for what probably is half of the salary you used to earn.

We're all in different positions. I'm not in a staff job and can anticipate continuing flying until I am 60 and without going on ops.

I've met plenty of folk who have left the military and have prospered and are happy. Equally, I have met many who either regret leaving or who have come back in one form or another.

The thing is we're all different and we're in in our own situations. One person's decision is not necessarily going to be right for another. What I am shocked at is the lack of information that we are able to base these decisions on. I've read the DINs. There is still a lack of detail and there is no-one you can talk to who knows.

How on earth can they expect us to make informed decisions?

[ValMORNA]

I can't say I understand all this modern jargon, so this is probably most unhelpful, but . . . .


In 1958 our lords and masters decreed that there were too many aircrew in the RAF and in common with many others I was informed that as of 31st December 1958 I was discharged 'Due to the contraction of the Service . . .' So the axe fell and there were several ex-WWII SNCO pilots sent on their way, at least one of my acquaintance in tears at the news.


So, when the RAF comes down to one squadron of pointy jets and one of drone controllers, what is to stop the same thing happening again?


Anyway, good luck and may your service and life be long and profitable.

[Onceapilot]

JAJ

Yes, you are right. However, at 55 it is a very good time to re-align your life and start de-institutionalising(?) yourself, if you can. Also, it is not half pay...I get 70% of my net (full-time) pay retired (net). I would be working full-time for 30% when you allow tax and NI etc

OAP

[just another jocky]

OAP - then you are very lucky and I wish you well.

I'm not sure there's a post-RAF job out there I want to do that would pay that much. For me, I'd be happier continuing flying, preferably part-time and do some volunteering in my spare time - stress & pressure-free.

Each to their own.

[wokkamate]

I haven't received a letter for service to 60 yet....should I have? :ugh:

PAS Sqn Ldr, FG(P). If I do serve to 60, the LTA calc, based on the pensions calculator, has me pretty much on the limit!

[just another jocky]

wokkamate - contact PSF and ask them, quickly, though you should have 30 days from receipt of offer.

[Whenurhappy]

I'm administered by a Joint unit; I've had to prompt them twice and it transpires they have sent the offer to my previous work address - the now-defunct Beaconsfield. No sign of the letter yet, and apparently a new offered 'can't be issued'. Also I spend most of the time out of the UK and BFPO to my location is glacially slow. Oh well, never mind. I'm not sure I want to work to 60 within such a sclerotic system.

[wokkamate]

Does anyone know when the offers were sent out? PSF seem to be on block leave currently and as Diaspora I don't have the luxury of popping in to see them....getting worried now.

[Sandy Parts]

wokka - tried your deskie (or WSOp Rearcrew Leader or whatever they are called these days?) - if he/she isn't on leave as well - they at least should know if you should be getting the letter! I suspect Handbrake House would have minimal interest in the subject even when they do return.

[downsizer]

Wokka, not aircrew but I had mine in early march, accepted it, and the dates changed on JPA around 2 april.

[just another jocky]

My e-mail was dated 27 Feb so decision date was 27 Mar which they have now extended at my request to 27 Apr.

[wokkamate]

Thanks guys, I will chase Manning when I get back into work on Mon. The letter may have arrived during Easter block leave though....I'd be gutted if I got refused service to 60 because of an RAF admin error!!!

[Biggus]

wokka,

If that were to happen you could sue them for loss of earnings, plus of course factor in the fact that you would have been promoted to at least Air Commodore by the time you were 60 (just like all the pregnant females forced to leave under the old rules were going to be). The RAF/MOD would settle (at the last minute) out of court as they know they wouldn't have a leg to stand on - and you could retire happily on the 6 figure sum you would receive in compensation! :ok::ok:

So what's to worry about?