Is the pension really worth it ??
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Is the pension really worth it ??
Writing only my third post, but have been a long time peruser of these pages.
My question is to anyone who has done the maths. Forgetting the golden handshake at 38/16 point and then the money paid annually until 55, how much would it cost to buy an equivalent pension in civvy street to be paid out from the age of 55( assume starting payment into a pension scheme from age 32) ? Is it worth staying in past 9 years of service (the point I am led to believe I will get some form of pension, albeit at 55/60) to an option point, or are the returns small for the extra years and not worth all the OOA and hassle and short notice, unscheduled time away from young family- time that I will never truly be able to retrieve?
Ultimately, I would want financial security for myself and family to old age (wouldn't we all) and it seems that my generation will suffer a huge pensions crisis, even more so than we are now seeing. But is the Air Force pension as good as it seems, or can you make the money up by getting out early and ( supposing one gets a job with a bigg(ish) airline) paying into a company scheme?
Many thanks in advance for any replies (I'll even chuckle at the abusive ones) and I understand that these things cannot be calculated without some objectivity being applied.
I also understand that, on first reading, I may well sound like some spoilt child. I hope that this is not the case; I still love my (primary) job and understand that there are many less fortunate than me who would sell their souls to do it. I have also made many firm friendships in my time with the Air Force and seen many places and experienced things I would not otherwise have done- for that I will always be grateful. But I cannot put my hand on my heart and say things are getting even slightly better. Even in the relatively short time that I have been in, the job has changed and there isn't as much fun to be had( I know there are forums aplenty on this matter), it's just that now seems like a bit of a crossroads in life for me and the question needed asking.
My question is to anyone who has done the maths. Forgetting the golden handshake at 38/16 point and then the money paid annually until 55, how much would it cost to buy an equivalent pension in civvy street to be paid out from the age of 55( assume starting payment into a pension scheme from age 32) ? Is it worth staying in past 9 years of service (the point I am led to believe I will get some form of pension, albeit at 55/60) to an option point, or are the returns small for the extra years and not worth all the OOA and hassle and short notice, unscheduled time away from young family- time that I will never truly be able to retrieve?
Ultimately, I would want financial security for myself and family to old age (wouldn't we all) and it seems that my generation will suffer a huge pensions crisis, even more so than we are now seeing. But is the Air Force pension as good as it seems, or can you make the money up by getting out early and ( supposing one gets a job with a bigg(ish) airline) paying into a company scheme?
Many thanks in advance for any replies (I'll even chuckle at the abusive ones) and I understand that these things cannot be calculated without some objectivity being applied.
I also understand that, on first reading, I may well sound like some spoilt child. I hope that this is not the case; I still love my (primary) job and understand that there are many less fortunate than me who would sell their souls to do it. I have also made many firm friendships in my time with the Air Force and seen many places and experienced things I would not otherwise have done- for that I will always be grateful. But I cannot put my hand on my heart and say things are getting even slightly better. Even in the relatively short time that I have been in, the job has changed and there isn't as much fun to be had( I know there are forums aplenty on this matter), it's just that now seems like a bit of a crossroads in life for me and the question needed asking.
Last edited by Dr Unken B Ligerant; 29th Jan 2005 at 18:12.
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Dr Unken
Simply, if you stay on past 38/16 - 22 yrs point , you are effectively working for your salary minus your pension! Yes?
Depending on your trade, where do you suddenly go into the cold at 38/47 and start a new job with the same salary you had last month?
I progressed to retirement because I enjoyed it, and I was fairly happy with the renumeration package.
However, the next 17 years for you, might be a little different to what they were for me.
Best o'luck
Simply, if you stay on past 38/16 - 22 yrs point , you are effectively working for your salary minus your pension! Yes?
Depending on your trade, where do you suddenly go into the cold at 38/47 and start a new job with the same salary you had last month?
I progressed to retirement because I enjoyed it, and I was fairly happy with the renumeration package.
However, the next 17 years for you, might be a little different to what they were for me.
Best o'luck
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Is it worth staying in past 9 years of service (the point I am led to believe I will get some form of pension, albeit at 55/60) to an option point, or are the returns small for the extra years and not worth all the OOA and hassle and short notice, unscheduled time away from young family- time that I will never truly be able to retrieve?
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IFA mate says that in todays money £300,000 is required to buy an annuity that will give you £20k/yr for life.
Leaving at 38 and getting £12k/yr for life is unmatchable in civvy street. Leave before that then the sooner you pay into a pension fund the better.
You can get more per yr than the RAF pay but not at 38 nor perhaps even 55, most airlines are rumoured to be soon extending all pilots to 60. You will also be paying for it (I know 7% is abated from our wage, it's still a good deal if you get the money at 38).
More importantly, you should ask yourself when you wake up do you think great, off to fly/banter/do the job therefore it's worth the sacrifice the family has to make. Alternatively, do you have a weary sinking feeling in the pit of your stomach?
Leaving at 38 and getting £12k/yr for life is unmatchable in civvy street. Leave before that then the sooner you pay into a pension fund the better.
You can get more per yr than the RAF pay but not at 38 nor perhaps even 55, most airlines are rumoured to be soon extending all pilots to 60. You will also be paying for it (I know 7% is abated from our wage, it's still a good deal if you get the money at 38).
More importantly, you should ask yourself when you wake up do you think great, off to fly/banter/do the job therefore it's worth the sacrifice the family has to make. Alternatively, do you have a weary sinking feeling in the pit of your stomach?
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I'd suggest that, if thoughts of pension etc are weighing so heavily in your thoughts, that perhaps your time for a career change is approaching. It's really not a job that should be done for the money alone.
No, I'm not a 'party liner'... I take the lump sum and pension in a few weeks' time at my deferred 38/16 point... but, in my case, its to pursue my long-held ambition to fly. Aunty Betty's gift of a lump sum and monthly beer tokens for life certainly made the decision exceptionally easy
but the decision would have been the same whatever.
No, I'm not a 'party liner'... I take the lump sum and pension in a few weeks' time at my deferred 38/16 point... but, in my case, its to pursue my long-held ambition to fly. Aunty Betty's gift of a lump sum and monthly beer tokens for life certainly made the decision exceptionally easy
but the decision would have been the same whatever.
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Pension worth it?
The down side of starting a 2nd career at 38/16 is that any job that pays more than a paper round attracts 40% tax on your pension. Best watch that IR are joined up on your tax code, I know 2 people who recieved £6k+ tax bills last year.
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The only thing to be careful of is the tax code on your pension. You have to make sure that if your combined income plus pension >=£35K that you have the pension taxed at 40% and not 22%. Usually catches you out in the first year!!
The other minor problem is that you have to deal with two seperate tax offices and neither can access the others records!!
Mind you it is your choice, you can choose to pay back a lump sum at the end of the tax year if you prefer!!
Didn't happen to me because of Beagles timely advice on the matter!!
The other minor problem is that you have to deal with two seperate tax offices and neither can access the others records!!
Mind you it is your choice, you can choose to pay back a lump sum at the end of the tax year if you prefer!!
Didn't happen to me because of Beagles timely advice on the matter!!
Last edited by The Gorilla; 31st Jan 2005 at 21:52.
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Once you notify the IR (usually by self assessment or if you volunteer the information to avoid the 6 year or so clawback) they join the 2 incomes together by a change of your pension tax code. Your taxable allowance is calculated on your main income, and your pension is taxed at the rate of tax you are finally assessed at. In practice everything over about £33k is taxed at 40%
Gentleman Aviator
Not quite so Eng (ret).
It can take a little bit of writing to achieve, but you can do it either way. Last year I PVR'd (50+) and I now work alongside, inter alia, another guy who left slightly before me at (I think) his 44 point.
We have each chosen to do it differently. I have all my allowances taken off my pension, and my pay is then taxed at whatever marginal rates apply. (And my pension is certainly NOT my main income!!) My colleague does it contrariwise, with his allowances taken from his pay, and marginal rates applied to pension. Only took a coupla 'phonecalls/letters in each case.
And of course, overall it makes no difference - you get paid £xK per year from various sources, so IR deducts £yK in tax. Net result in both cases £(x-y)K in pocket, so doesn't matter (unless herindoors sees pay slips!)
But you do have to tell them! £500 a month might hurt, but it seems to me to be better than an annual £6K demand......
It can take a little bit of writing to achieve, but you can do it either way. Last year I PVR'd (50+) and I now work alongside, inter alia, another guy who left slightly before me at (I think) his 44 point.
We have each chosen to do it differently. I have all my allowances taken off my pension, and my pay is then taxed at whatever marginal rates apply. (And my pension is certainly NOT my main income!!) My colleague does it contrariwise, with his allowances taken from his pay, and marginal rates applied to pension. Only took a coupla 'phonecalls/letters in each case.
And of course, overall it makes no difference - you get paid £xK per year from various sources, so IR deducts £yK in tax. Net result in both cases £(x-y)K in pocket, so doesn't matter (unless herindoors sees pay slips!)
But you do have to tell them! £500 a month might hurt, but it seems to me to be better than an annual £6K demand......
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A useful tool
To play around with is available from the Financial Services Authority at
http://www.pensioncalculator.org.uk
Play around with some contributions / retirment ages to see what you would get. Note that the output is in today's prices - i.e your weekly income on retirment will be higher, but it will have a purchasing power of the sum indicated at today's prices.
http://www.pensioncalculator.org.uk
Play around with some contributions / retirment ages to see what you would get. Note that the output is in today's prices - i.e your weekly income on retirment will be higher, but it will have a purchasing power of the sum indicated at today's prices.
Gentleman Aviator
... and the strangest bit of the IR's response (same for self and for aforementioned colleague) is after 30-ish years filling in tax returns, getting a note from them saying don't bother in the future unless my circumstances change - which of course they never really did whilst serving, despite the pain of the annual tax return
