Pensions Question

[bob9]

AL R, If I could ask you a question. Over the last 2 days during one of the briefings we were advised to seek professional advice as our public sector pensions were being looked at (by the government not the air force). I was aware of the recent changes but i tried to read through the previous posts but soon got lost. Here is the question then; I have planned remaining in the air force due to my pension and more particularily on my tax free lump sum. I thought the £50,000 to £250,000 discussed was the amount you paid into your pension per annum and not what you receive so I am fine. If I leave the air force in 2013 is my max com sum (around 60K) still tax free or are they talking about changing that? I realise that many people are worse off than me than me but having served over 18 years and suddenly finding out that i only have about 2 years to go the thought of my pension being halved is obviously of interest to me.

[Al R]

Bob,

I am in Norfolk with clients the week after next - possibly the same unit as you.

Firstly, the amounts mentioned (250/50k) are the annual amounts that you once could/ now can put into your pension fund each year before incurring tax. In the case of mil, its a nominal amount allocated by the MoD for you and not what you put in yourself.

The amount that you mentioned commuting is tax free and there is no suggestion that the State is going to change that. You can invest it as you wish, or place that into an other pension fund to gain further tax relief if you are still earning and don't need it immediately.

Hope that helps.

[The B Word]

I must admit I am confused as I thought this was the case from the Armed Forces Benefits Calculator:

The Armed Forces Pension Scheme is a non-contributory pension scheme; this figure [in the calculator], therefore, provides you with an indication of the amount of money the MoD contributes annually on your behalf towards your pension. The value quoted is based on SCAPE rates, which are routinely valued by the Government Actuary’s Department. However, this figure is illustrative only, and does not represent the value accruing to your pension. SCAPE rates represent the amount the MOD contributes per person for the total cost of Armed Forces pensions, not the amount payable to individuals.

Now from the benefits calculator the much vaunted, just about to get clobbered, Wg Cdr rate under SCAPE would be £24,286.75 - which is nowhere near £50k pa even if it was contributory (which it isn't!).

Confused of NATO sends

[Al R]

Rather than start another pensions thread.

The Finance Bill 2011 finally received Royal Ascent yesterday (at 1435 if you're interested) with several negative effects on pensions, so it is now an act of Parliament. At present, it would appear that there were no last minute amendments to the proposals.

Annual pension contributions of over £50,000 may be subject to tax charges (Annual Allowance) and lifetime benefits from pensions of over £1.5m may be subject to tax charges I (this could affect anyone with a likely AFPS income in retirement of over £70,00 or so). It may be prudent to arrange for 'Fixed Protection' with HMRC, particularly if your notional pension 'pot' is likely to breach the new £1.5m limit.

This recent article from The Telegraph summarises most of the messages surrounding the changes and the subsequent challenges to many public sector final salary schemes, some of which apply to AFPS. Those at the higher echelon of the rank structure, or planning to be, might want to think about their retirement planning and how AFPS fits in with it, and how it will fit in with AFPS. The pensions picture has changed, and it will continue to do so.

Doctors quit gold-plated pensions - Telegraph

[andgo]

Latest interesting pensions rumour is that if you leave post any 'change' to the current pension schemes, you 'may' be entitled to your gratuity, but you will not receive your pension til age 60 despite having to leave at 55. Anything accured before 'change' will be honoured, but not til you're 60.
Anyone likely to stay beyond the change who is already past IPP?

[Grimweasel]

Andgo-

In that case thank god I'm pensionable in Jan 12 - along with a shiny new MBA all being well. Goodbye Services - it was nice whilst the good times rolled. Time to run and grab all I can before it changes ;-(

I have heard this talked about before - there was talk of scrapping the immediate pension for Offrs at 38 or 16 Yr point - or 22 yrs for NCOs etc - and not getting your pension until 65!! - Oh and I also heard that HRMC are looking into taxing the 'Early Departure Payment' for those on AFPS05. I can see people running for the JPA Termination button already.

[Melchett01]

Latest interesting pensions rumour is that if you leave post any 'change' to the current pension schemes, you 'may' be entitled to your gratuity, but you will not receive your pension til age 60 despite having to leave at 55. Anything accured before 'change' will be honoured, but not til you're 60.

That very question was asked at a recent Air Manning briefing whilst on a course, and they came back with the answer that categorically whatever you earn before the change date (2017 is allegedly when it will kick in) is yours - gratuity, immediate pension the works. If you serve say until 2020, you would get your gratuity and pension based on service until the change in 2017 but the final 3 years of service would be preserved until you were 60 under the new scheme.

Unless of course they were wrong or telling bare faced lies - neither or which Manning would ever do. Right? Forces Pension Society would probably be the best place to go and ask that very question though.

[Al R]

Oh and I also heard that HRMC are looking into taxing the 'Early Departure Payment' for those on AFPS05.

Generally speaking, if the talk about cutting back on the EDP benefit is pretty comparable to taking tax free cash from a personal pension, then there has been talk of taxing that doing the rounds too. Nothing definite, nothing certain, just a reflection by GO that GO has to find more money from somewhere! If we assume that the very last benefits he will cut are going to be child related allowances for the lower paid, how much further up the list will tax free cash from pensioners be?

HMRC is looking at taxing anything and everything at the moment - its not personal to HM Forces if thats any consolation. We can probably say goodbye to VCTs pretty soon, and there are lots of disturbing reports being bandied around by charities representing the lesser paid, regarding pension contribution tax relief. So, in general, consider diversifying away from an unhealthy over obsession with any one particular pension scheme and strategy, and consider all options including Offshore Bonds, personal pensions for a wife/husband who doesn't have a large personal pot (unrelated to the size of their tum), maxxing out on an ISA and now of course, the Junior ISA too.

See your bank salesman, an IFA, phone a friend.. but the sooner you do something the better.

[Jumping_Jack]

So, the latest gen states normal pension age for Armed Forces will be 60, but retirement remains 55. Guess I shall be poor for 5 years on leaving the RAF (unless redunded first) (Of course people are our most valuable asset......)

[Really annoyed]

So, the latest gen states normal pension age for Armed Forces will be 60, but retirement remains 55.

Where does it state that?

[Jumping_Jack]

...........ibn 14/11

[Red Line Entry]

It says:

"The Normal Pension Age for the Armed Forces is recommended to increase from 55 to 60. This does not mean that everyone will have to serve until age 60, in the same way that, at present, very few personnel serve to age 55. This recommendation does not apply to the deferred pension age."

I don't read that as retirement remaining at 55. Moreover, these are only RECOMMENDATIONS. The IBN also says:

"The Government has agreed that, because the Armed Forces do not have Trade Unions to represent their views, a separate consultation process will be needed. This has yet to be established. Until this consultation process is complete it will not be possible to say what a new pension scheme will look like."

So don't panic Mr Mainwaring - lots of water to flow under the bridge yet...

[The B Word]

Red Line Entry

The sad thing is that I interpreted it the same way as Jumping Jack and so I am not that confident that you are correct. Currently preserved pensions are paid at either 60 or 65 depending on whether you are on AFPS 75, AFPS 05 or RFPS 05. So I can see a gap of immediate pension happening; I've also heard rumour of lump sum at 55 and then pension at 60 from several sources.

The B Word

[ALM In Waiting]

Does anyone know if these changes happen what the effect will be on an NCO still on AFPS 75 but who has not yet completed 22 years?

Is it likely that your immediate pension would be deferred to age 55 or even 60?

Or will it be that whatever has been accrued up to the date the schemes are changed? I.e. 17 years worth of pension contributions are payed at the 22 year point, remaining 5 years worth deferred to 55/60.

Sorry if I'm being somewhat dense, but I'm finding it a touch confusing.

[Really annoyed]

Pension benefits under the existing Armed Forces Pension Schemes will continue to be earned up to the introduction of the new scheme. The Report makes it clear that pension benefits already earned will be protected on adoption of the new scheme. For the years that an individual has already served, and until reforms are made, all of the pension benefits already earned will be kept. These benefits will be worked out in the same way, with individuals being able to draw them at the same age as they can now, based on their final salary on the date that they retire.