Mil Pension question

[drugsdontwork]

Quick question re: RAF pensions.

On completion of my 16 years (com) in the RAF I am happy that I get the IP and the payout.

I am a little hazy as to what happens subsequent to this, and at what age? If anyone can shed any light with rough figures at present rates I would appreciate it. Assuming financial meltdown does not intervene, of course.

Ta!

[drugsdontwork]

I did. It tells me what I knew, 28.5% of earnings with 3xlump sum.

It tells me nothing after this hence the question.

[drugsdontwork]

AIDU,

There is no need for that s**t. I clearly know the basics, and wish to know how much i can expect and when in terms I can relate to, ie todays rates.

Hope just maybe once someone could offer a quick couple of lines of help without the sarcky bo@@ocks.

[getsometimein]

Excuse my ignorance, but when I do the pension calculator I get a full breakdown of what I can expect. For example...

Pension Details AFPS 75
Preserved Pension at 60 2001
Terminal Grant at 60 6003
Pension or Revision at 65 5040
Terminal Grant at 65 9117
Resettlement Grant 9573

So if I left after my 12 years i'd get 9.5k at age 30 for resettlement... 6003 at age 65 + 2001 per year... 9117 at 65 + 5040...

Or do you get something completely different (excusing numbers)

[Lurking123]

OK, assuming you're on AFPS75 ('cos that's what I'm on).

You'll get your lump sum and any amount you have chosen to commute (most people choose to go for maximum commutation for tax benefit). This reduces you IP by about 20%. So, let's say your pension was going to be £20K with a gratuity of £60K. You go for maximum commutation which will reduce your IP to about £16K and increase your lump sum to about £100K.

You will now receive a monthly 'salary' (your reduced pension) of about £1000 (£16K/12 less tax). Every year (April?) the previous September's Retail Price Index (RPI) is applied to your original IP. You will continue to get £16K but your original fund (£20K) increases by RPI. At you 55 point you IP is restored to £20K + the compound interest generated by 17 years of RPI and your pension takes a significant jump (assuming 5%/year this will be up to about £45K). From then onwards, your pension is increased annually in line with the previous September's RPI.

Hope that is of help.

Edited - getsometimein, can I suggest you get some time in? The chap will be leaving at his 38/16 point so he is entitled to an immediate (far greater) pension that you will get after your 12 years.

[jockspice]

Lurking123,

That is by far the simplest and most concise explanation I have seen.

Cheers!

[drugsdontwork]

Lurking,

Perfect, exactly what I was after, thanks mate!

[Lurking123]

AIDU, you appear to have a keyboard problem.

brichure
netwirk

Either that or you should have worked harder at school.

[spheroid]

Has anyone tried this...? Assuming that you are on a PA Spine and that you are on AFPS05.... Use the Calculator and put in that you will complete your service. Then do it again but put in that you intend to PVR at the end of your service minus 1 year.... Wow..... Double your money ...? Or am I missing something?

[drugsdontwork]

AIDU, i dont know what species you belong to but last time i checked, 5 years was not a very long time to plan ahead re pensions and future options. Quite the opposite. So previous? No. And as this very thread illustrates perfectly this forum is a great place to glean some helpful and accurate information. In fact, the useful stuff goes some way to balance some of the offensive, pointless, sarcastic drivel that some users devote themselves to posting. You may have noticed this yourself.

[ShyTorque]

Cricky you are a bit previous aren't you? If you have to rely on a rumour netwirk for your pension details, which isn't due for another five years then you really don't deserve any help. You a Commissioned Officer as well. God help the rest of us.

AIDU, Did you know you can get free use of dictionaries online, too?

Lurking123, thanks, I agree that your explanation is excellent. As I retired at my 38/16 point some time ago I cannot use the official pensions calculator and I have had difficulty getting straightforward answers by the scant other means now open to me.

[Al R]

Drugs dont..: .. the last time i checked, 5 years was not a very long time to plan ahead re pensions and future options. Quite the opposite. So previous? No.

Very true Drugs.. even so, 5 years is still possibly borderline too short, but its certainly better than the 12 months or so which most people tend to work to (and which I did). 5 years will give you the chance to put into place a strategy to build up some liquidity, to plan ahead to mitigate as much tax as possible and to take a proper strategic view of where you want to be in 10 and 25 years time. The chances are you're not yet 'middle aged' and have a different perspective of life. Once you cross that intangible line and stray into your mid/late 40s other pressures and perspectives kick in. If you plan ahead though, you can plan for the future and not even miss a beat when other pressures kick in.

5 years will give most people time to evaluate whether or not they will need to establish funds to pay for University and to ensure children will be leaving it debt free. Also, you’ll be able to establish a portfolio and invest in equities and various funds (there are some real bargains about at the moment), to capitalise on current savings rates to die for - if you're a higher rate tax payer, the chances are that the real value of your savings in the local bank was slaughtered by inflation long ago because of the 40% you're paying on the interest you're 'earning' (ha) and if AVCs aren’t your bag - to establish a private pension fund. The g'ment is currently giving you 20% in top of anything you chuck into a private pension - and if the other half doesn't work, they can get tax relief up to £3600 pa as well.

And when you're in the final few months of your career, you're too busy looking for a job, so you'll probably just do the first thing thats suggested by the yoof in the lilac nylon shirt at the bank. You’re invariably a little like a rabbit caught in headlamps, and it’s a hassle you’re quite happy to offload onto someone else, to your detriment possibly. If you'd like any free advice on long term planning, so that you can take a measured and insightful perspective - then don't hesitate to pm me.

Finally, Lurking is correct with his concise analysis. But one size doesn't fit all - no two people are the same. If you're going to do not a lot with the (tax free) big lump sum anyway apart from get a warm fuzzy glow when the chap at the bank doffs his cap, it might be worthwhile to settle for a smaller amount upfront and opt for a larger monthly pension that tax has been applied to at source. The reasons are many, just as each of our circumstances are equally as infitessimally different. Again, starting early (5 years) is going to give you an idea how you want your pension to work for you, and not vice versa.

[Lurking123]

Al R is correct. Maximum commutation works for most but sometimes you may be better off preserving a bit more pension income. If I were you, I would be talking to a financial advisor (trust me there are some good ones out there!) and formulating a long term plan.

One last point - spend wisely. When I was in the RAF I thought I would go and blow a significant chunk on a fast car/boat/round the world holiday but, when the time came, I invested wisely (not stocks and shares). Right now I get £500+/month interest payment on the lump sum. Not exactly massive money, but at least it is working for me.

[Al R]

Good on you - is IHT a concern? I hope you've done some planning to ensure Brown & Darling don't get their mitts on your estate.

[BEagle]

Well, I retired about 3 years before my NRD as a Spec Aircrew Sqn Ldr on AFPS75 terms and decided to maximise the pension rather than take the maximum lump sum. After index-linking kicked in in early 2006, I now get the princely sum of £20000 per annum after tax..... Which is OK as a basic income, augmented by the odd bit of tax-declared income from other sources.


Of course flying pay wasn't pensionable, nothing was being done to compensate those who had <5 years to NRD and couldn't transfer to AFPS05, so with the RAF beginning its death spiral it was time to pull the black and yellow handle in 2003; I could have commuted a huge amount, but decided that the security of a reasonable pension was preferable - and bolleaux to the doom saying actuaries who think that everyone who leaves HM forces will pop their clogs within a couple of years of retiring!

Those who are very brave might spot some good shares to snap up right now - my (inherited) portfolio has taken a bit of a battering, as have the PEP and ISA, so as soon as they come up to my target figure again once the greed of city bankers and other white collar criminals has been expunged, I shall flog the lot and move everything to join my more conservative sums invested in major British bank savings accounts. Less interest income, but far less risk!!

Of course there's always the chance of a decent tax free win on Ernie!

[Lurking123]

Melchett & Darling will get the absolute minimum from me when I die. As you said, it is all about long term planning (and a spouse who knows the industry inside out). We have always had a low risk strategy and have steered clear of the City gamblers. As Beagle says, a savings account is (relatively) safe and creates cash. Ernie is also a friendly punt.

[Al R]

Beagle – Actuaries are people who steered clear of accountancy because they thought it offered too much excitement. If your portfolio is in the default fund (is it managed by a clearing bank?) it will probably have been in equities, which, until about 6 months ago was the right thing to do. Some fund managers got badly frazzled because they flew into the ground (pressonitus?) but those who took a step back started shifting allocation and began looking at gilt and bonds (one High Street chain which runs its own pension fund drew ridicule because it got into gilt 18 months ago – look who’s laughing now).

Now of course, with rates dropping and the FTSE being grossly undervalued, they’re starting to close in and sniff at the bones again to get back in. The tragedy is, there’s nothing wrong with many of the FTSE companies currently down on their knees – market sentiment was their downfall. So although it might not be worth shifting, if you’re paying your stockbroker a large annual management charge and if he hasn’t bought home the gravy, sack him. Move on.

ISAs may be tax free, but that doesn’t make them always the best deal - don’t be target fixated on the epithet of ‘tax free’. Anglo Irish is currently offering 7.81% on some savings funds which (even with 20/40% taxed at source) is always going to be better for you than some shabby High Street ISAs (Lloyds is only offering 4.6 on some of its ISAs). FYI, Birmingham Midshires is offering 6.15% on 12 months.

Beware too (and this to Lurking as well), of reacting and polarising an investment strategy because of short term events. Swinging violently to something that is risk averse because you don’t want to lose money might well end up as a self fulfilling prophecy unless you have a proportion of your funds allocated to slightly more speculative funds. The value of your portfolio will drop in real terms anyway, as inflation shreds it real value.

[BEagle]

Well, the ISA and PEP are both in a tracker fund which is linked to the FTSE All-Share. Down at the moment at 97% value:investment, but has been as high as 151% in May this year, down from a high of 161% in June 2007.


The portfolio is assuredly not managed by some thieving fund manager, it just ticks along and is reasonably balanced across banking and insurance, pharmaceutical and energy companies in the main. I agree about gilts; however, I only have a token £5k invested there. Overall it's at 74.8% of the target I've set for it; as soon as it reaches that target for 2 consecutive weeks, I shall sell up and transfer the portfolio to a Big4 high street bank high interest savings account. That'll only leave the PEP and ISA to be at the mercy of the FTSE.......

Ah well, the portfolio has just made another £150 whilst I was typing the above....

[Al R]

Flt Lt Mac,

The passport scheme doesn't have to degrade the level of cover at the end of the day, it just dictates how that cover might be exercised and what it might mean to an individual saver. The Irish g'ment stepped in before we did and raised cover which changed everything anyway.

With regards to Anglo Irish, for subordinated debt, Anglo-Irish is rated by Moody's/S&P etc as 'A's across the board (stable outlook) but if they went bust, yes - you might wait to get your money back. As it stands though, over here too, the FSA and the Financial Services Compensation Scheme would quote you that sort of time scale for UK holdings anyway.

But in terms of the principle, placing money into a higher interest account and paying tax on it can be more advantageous than investing into an ISA account which does have a tax exempt wrapper. Thats the point I was trying to make. How each saver interprets that principle with his/her own circumstances might change and would need to be considered on an individual basis.

[cazatou]

When we bought our present property in France in February 2003 it was at an exchange rate of 1£=1.56€.

Property values have gone up by some 30+% in euro terms since we bought and the exchange rate is now approx 1£ = 1.26€ - meaning that those euros are worth some 20% more in sterling terms.

Whilst the number of British house seekers has markedly declined with the UK under its current management; the rest of Europe (although affected by the current Market conditions) has been far less volatile. The former Baltic States who are now part of the EU are replacing the British in the quest for a home in the Sun.

We are still fielding telephone calls from Local Estate Agents asking if we wish to put our property on the market - and the number of Estate Agencies in the local Town has increased from 4 in 2002 to 9 today.