Armed Forces pension
I know we are a little way off the budget, but this is a rumour network and home to much speculation and teeth nashing - what do we think Phil the Spreadsheet is likely to do to pensions this time round? After all, the spending commitments are stacking up and the money has to be found from somewhere. I think Andrew Marr counted something like £11Bn worth of extra spending in just one interview he did on Sunday morning.
Former pensions minister Steve Webb is already out of the blocks early suggesting that cuts to tax relief or the annual & life time allowances would help balance the books and would pass the Daily Mail test as most people think £1 million pound pension pots are the preserve of the uber rich.
Cuts to pension tax relief? You can count on it, says Webb - Citywire
What's the current mood music around the bazaars? Discussing it at work this afternoon and my 1-star is already doing the calculations to jump ship if his pension is taxed any further on the grounds that it just wouldn't be worth it at his time of life, may as well pull stumps and retire to the pavilion early. And I can't imagine he is the only one - in their efforts to penalise the wealthiest, the Tax Man's grubby mits are now well into the pockets of those in the middle of the pack rather than just at the top.
Former pensions minister Steve Webb is already out of the blocks early suggesting that cuts to tax relief or the annual & life time allowances would help balance the books and would pass the Daily Mail test as most people think £1 million pound pension pots are the preserve of the uber rich.
Cuts to pension tax relief? You can count on it, says Webb - Citywire
What's the current mood music around the bazaars? Discussing it at work this afternoon and my 1-star is already doing the calculations to jump ship if his pension is taxed any further on the grounds that it just wouldn't be worth it at his time of life, may as well pull stumps and retire to the pavilion early. And I can't imagine he is the only one - in their efforts to penalise the wealthiest, the Tax Man's grubby mits are now well into the pockets of those in the middle of the pack rather than just at the top.
Well Melchy,
I suspect we could easily see the higher rates of pension saving tax relief cut to basic tax level.
So many things are unraveling at the moment, the question has to be, how bad will it get for the UK?
OAP
I suspect we could easily see the higher rates of pension saving tax relief cut to basic tax level.
So many things are unraveling at the moment, the question has to be, how bad will it get for the UK?
OAP
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In many ways, more senior savers who are already in a DB scheme like AFPS, wont be (ultimately) too badly affected. That might sound daft. I'm a supporter of tax relief being age related, amongst other factors. There are other threats which loom large. The first, I believe, relates to the annual allowance. Not so much in changing it from its headline figure, but more, in how that headline figure is arrived at. GAD previously published its 'Reducing the Annual Allowance Setting the valuation factor' paper in October 2010. At the time, it suggested that the valuation factors were good for 'five to ten years'. Do the maths. The role of the paper was to recommend a single factor to be used to value the increase in an individual's DB pension over a single tax year, for the purpose of applying the Annual Allowance test (from April 2011). A valuation factor of sixteen was finally settled on, compared to a previous, far more benign factor of ten (a factor of twenty is currently used to determine the Lifetime Allowance test).
To give you an idea, when working out your annual allowance, calculate the annual pension amount at the beginning of your pension input period (AFPS is April), in other words, the pension that you would get if you retired now at normal pension age. That number should then be increased by the increase in CPI over the 12 month period to the September *before* the start of the tax year in which the annual allowance is being calculated. As AFPS also gives you a lump sum in addition to the pension (i.e. before further possible commutation of pension), you add this on.
You then multiply this amount by the magic number I just referred to - sixteen. Then (phew) you calculate the value at the end of the pension input period; the end value shouldn't be increased by CPI. Again, multiply this amount by sixteen. And, again, because AFPS offers three times annual pension as a lump sum, you once more add it on. Deduct the start value from the end you have calculated, this is the pension input amount. Bear in mind that the rights to be valued will also include any benefits taken during the period, any rights transferred out to another registered pension scheme, and any pension debits, and also any other pension contributions that may have been made.
But you can see how much of an impact that a revaluation increase from ten to sixteen has has. No one knows if a further revaluation will happen, but the bottom line is simple. It's easy to do, and once the public sector pay cap has been formally removed, more middle/high level managers/officers will be brought into scope of breaching the annual allowance by virtue of their income if it was, for instance, raised by even a few basis points. Simply put, DB scheme members are seen as fair game by the opinion formers and the cognoscenti. Jeremy Corbyn is snapping at May's heels and it is anticipated that today, she will announce in Manchester the adoption of some of his housing policies. She will not care too much (my belief anyway) if an obscure, highly technical calculation that targets middle/high level managers in the public sector makes a few more quid to pay for the social housing that she has been compelled to introduce.
I will post about my second worry later, but I'd like to finish off by reminding you that I am only a retired and long past it Regiment JNCO so check your own maths and don't sue me if you get it wrong.
To give you an idea, when working out your annual allowance, calculate the annual pension amount at the beginning of your pension input period (AFPS is April), in other words, the pension that you would get if you retired now at normal pension age. That number should then be increased by the increase in CPI over the 12 month period to the September *before* the start of the tax year in which the annual allowance is being calculated. As AFPS also gives you a lump sum in addition to the pension (i.e. before further possible commutation of pension), you add this on.
You then multiply this amount by the magic number I just referred to - sixteen. Then (phew) you calculate the value at the end of the pension input period; the end value shouldn't be increased by CPI. Again, multiply this amount by sixteen. And, again, because AFPS offers three times annual pension as a lump sum, you once more add it on. Deduct the start value from the end you have calculated, this is the pension input amount. Bear in mind that the rights to be valued will also include any benefits taken during the period, any rights transferred out to another registered pension scheme, and any pension debits, and also any other pension contributions that may have been made.
But you can see how much of an impact that a revaluation increase from ten to sixteen has has. No one knows if a further revaluation will happen, but the bottom line is simple. It's easy to do, and once the public sector pay cap has been formally removed, more middle/high level managers/officers will be brought into scope of breaching the annual allowance by virtue of their income if it was, for instance, raised by even a few basis points. Simply put, DB scheme members are seen as fair game by the opinion formers and the cognoscenti. Jeremy Corbyn is snapping at May's heels and it is anticipated that today, she will announce in Manchester the adoption of some of his housing policies. She will not care too much (my belief anyway) if an obscure, highly technical calculation that targets middle/high level managers in the public sector makes a few more quid to pay for the social housing that she has been compelled to introduce.
I will post about my second worry later, but I'd like to finish off by reminding you that I am only a retired and long past it Regiment JNCO so check your own maths and don't sue me if you get it wrong.
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New taxation legislation surrounding redundancy payments.
Back in 2012, a few dozen officers were let down very badly when they weren't made properly aware of the changes surrounding retirement income in respect of them being made redundant between the twelve and sixteen year points of their careers. The Armed Forces (Redundancy, Resettlement and Gratuity Earnings Schemes) Order 2010 was introduced very quickly and quietly - the guardians were discovered asleep at their desks.
On Tuesday of this week, the government laid before Parliament fresh legislation surrounding the taxation of redundancy payments. It has also recently published a consultation about what redundancy payments in a (possible) new round of public sector redundancies should look like. It doesn't take the brains of a rocket engineer to work out the two events may not be entirely coincidental.
There is much to fret over. In particular, tax treatment on payments over £30,000 from April of next year. The new treatment of payments in lieu of notice (PILONs) is also worrying. Employers often terminate the employment prematurely by making a PILON instead of giving the full period of notice, and the tax treatment of this type of payment could raise particular difficulties.
If the employment contract expressly gives the employer discretion to make a payment in lieu of notice, and the employer makes such a payment, then the payment is treated as taxable earnings arising from the contract. And that's what you're going to have to looking out for, as well as other gems (such as HMRC reserving the right to alter the £30,000 benchmark).
If you're a member of the Forces Pension Society, contact them, and make sure they stay on top of this. It does, after all, affect retirement income. Just ask the Unpensionables.
Back in 2012, a few dozen officers were let down very badly when they weren't made properly aware of the changes surrounding retirement income in respect of them being made redundant between the twelve and sixteen year points of their careers. The Armed Forces (Redundancy, Resettlement and Gratuity Earnings Schemes) Order 2010 was introduced very quickly and quietly - the guardians were discovered asleep at their desks.
On Tuesday of this week, the government laid before Parliament fresh legislation surrounding the taxation of redundancy payments. It has also recently published a consultation about what redundancy payments in a (possible) new round of public sector redundancies should look like. It doesn't take the brains of a rocket engineer to work out the two events may not be entirely coincidental.
There is much to fret over. In particular, tax treatment on payments over £30,000 from April of next year. The new treatment of payments in lieu of notice (PILONs) is also worrying. Employers often terminate the employment prematurely by making a PILON instead of giving the full period of notice, and the tax treatment of this type of payment could raise particular difficulties.
If the employment contract expressly gives the employer discretion to make a payment in lieu of notice, and the employer makes such a payment, then the payment is treated as taxable earnings arising from the contract. And that's what you're going to have to looking out for, as well as other gems (such as HMRC reserving the right to alter the £30,000 benchmark).
If you're a member of the Forces Pension Society, contact them, and make sure they stay on top of this. It does, after all, affect retirement income. Just ask the Unpensionables.
Well with payments under the new Armed Forces Redundancy scheme being so small (28 years service and over 3 years left to serve equals 3 months pay maximum, which for me is around £10,000) I don't think many will get anywhere near £30,000. As you say the pension/redundancy schemes and HMRC have been manouvering to make it far cheaper to get rid of people.
Incidentally that £10,000 is approx £300 more than the statutory redundancy payment required by law, long gone are the 18 months of pay redundancy payments (caveat: the amounts I quote are for personnel who have passed their immediate pension point I.e. 22 years for ORs who were on afps 75).
Incidentally that £10,000 is approx £300 more than the statutory redundancy payment required by law, long gone are the 18 months of pay redundancy payments (caveat: the amounts I quote are for personnel who have passed their immediate pension point I.e. 22 years for ORs who were on afps 75).
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The Immediate Pension Point is the stinger. The problem is, a few dozen officers didn’t get to reach their IPP. As you may know, a very small group of military officers, (cross service), were made compulsorily redundant back in 2102 onwards, very close to it as part of the Future Force 2020 redundancy programme. Some measured how close they were in days/weeks. Consequently, theylost expected retirement benefits of between £100,000 and £200,000. Previously, commissioned redundees, who had completed between 12 and 16 years’service got retired pay which would be tapered down from the full rate. So, someone made redundant having served 13 years would receive a smaller tapered (13/16ths) pension than someone who had served for 14 years (14/16th).
Coincidental to the original notice of intent to make officers redundant in 2010, the coalition government rushed through Statutory Instrument 832, laid before Parliament on in March 2010. It clarified what would happen in the event of redundancy to those who have served a full 16 years but made no reference at all to those in the 'tapered' 12–16 year bracket. In effect, that category of officer completely ceased to exist - the contract was changed and it was one that removed lawfully accrued benefits. However, no one was not informed of the change, least of all because most were probably too busy in Iraq or Afghanistan and had other things on their minds. Consequently, in 2012, when serving officers were made redundant short of their IPP, they suddenly discovered the details of their new contract and new redundancy terms.
A Flt Lt, for instance, lost somewhere in the region of £125,000 over 20/25 years.
It was a contract item relating to an accrued benefit that had been removed without consultation, dissemination or reference, and it seems to have passedby without so much as a whimper, let alone a fight. Service personnel were recruited, promoted and even retained on the basis of receiving their ImmediatePension, which was also confirmed in writing when some officers converted to a Regular Commission. Previous Coalition Government Ministers are on record stating these service personnel were receiving a “significantly increased tax free lump sum" to compensate for their pension losses. This is disingenuous. The extra in capital lump sum they received is insignificantrelative to the lost pension.
No one is saying that the state can't make its citizens worse off, of course it can. But it has to do it fairly, and without cynical maladministration - especially to those most loyal of public servants who it trumpets about every November. For instance, career choices may have been made differently. Other groups of public servants have unions and representatives to fight their cause when it comes to pensions.. service personnel demonstrably have absolutely no one. They, and their families rely entirely on the Chain of Command, Civil Servants, Ministers and Parliament to protect them from unfair treatment. I have secured the crucial support of Baroness Ros Altmann, Sir Steve Webb (both former pension ministers) and (sponsor) Johnny Mercer MP (and others who are helping on the condition of absolute discretion) who will be hosting a meeting at Westminster later this month (along with some of the affected) to highlight the plight of the unpensionables and asking why it was allowed to happen.
Coincidental to the original notice of intent to make officers redundant in 2010, the coalition government rushed through Statutory Instrument 832, laid before Parliament on in March 2010. It clarified what would happen in the event of redundancy to those who have served a full 16 years but made no reference at all to those in the 'tapered' 12–16 year bracket. In effect, that category of officer completely ceased to exist - the contract was changed and it was one that removed lawfully accrued benefits. However, no one was not informed of the change, least of all because most were probably too busy in Iraq or Afghanistan and had other things on their minds. Consequently, in 2012, when serving officers were made redundant short of their IPP, they suddenly discovered the details of their new contract and new redundancy terms.
A Flt Lt, for instance, lost somewhere in the region of £125,000 over 20/25 years.
It was a contract item relating to an accrued benefit that had been removed without consultation, dissemination or reference, and it seems to have passedby without so much as a whimper, let alone a fight. Service personnel were recruited, promoted and even retained on the basis of receiving their ImmediatePension, which was also confirmed in writing when some officers converted to a Regular Commission. Previous Coalition Government Ministers are on record stating these service personnel were receiving a “significantly increased tax free lump sum" to compensate for their pension losses. This is disingenuous. The extra in capital lump sum they received is insignificantrelative to the lost pension.
No one is saying that the state can't make its citizens worse off, of course it can. But it has to do it fairly, and without cynical maladministration - especially to those most loyal of public servants who it trumpets about every November. For instance, career choices may have been made differently. Other groups of public servants have unions and representatives to fight their cause when it comes to pensions.. service personnel demonstrably have absolutely no one. They, and their families rely entirely on the Chain of Command, Civil Servants, Ministers and Parliament to protect them from unfair treatment. I have secured the crucial support of Baroness Ros Altmann, Sir Steve Webb (both former pension ministers) and (sponsor) Johnny Mercer MP (and others who are helping on the condition of absolute discretion) who will be hosting a meeting at Westminster later this month (along with some of the affected) to highlight the plight of the unpensionables and asking why it was allowed to happen.
Also, the very best wishes for success in your efforts to correct poor treatment of Service personel! 
