Armed Forces pension
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Here's even more to worry about:
Lib Dems' pension tax: '5p on rate of income tax' for senior public sector staff.
The headline is a little misleading, but what it boils down to is:
The reasoning goes like this:
Ouch!! 
It looks like a direct hit at the military to me; as Danny Alexander seems convinced that the military has a non-contributary pension scheme, I guess he thinks that higher rate tax payers in the military would not be hit by the 20% tax-relief restriction to pension contributions. Therefore he's wanting to claw back money another way. Maybe staying on AFPS75 isn't such a good thing after all.
Lib Dems' pension tax: '5p on rate of income tax' for senior public sector staff.
The headline is a little misleading, but what it boils down to is:
A senior teacher [or military personnel] earning £80,000 a year could have to pay almost £4,000 a year in extra tax, accountants estimate.
Many teachers, for example, see their eventual pension increase by one eightieth of salary each year. So a teacher earning £80,000 would get a £1,000 rise in annual pension income as he completes each extra year in the job. The tax rules stipulate that the effective value of this extra income is 16 times the amount, so a £1,000 a year rise in pension is equal to a £16,000 pension contribution.
This £16,000 theoretical contribution would be taxed at 20pc if higher-rate relief were abolished, resulting in a tax bill of £3,200 a year. But members of this pension scheme are also entitled to a lump sum, which gives rise to another tax liability.
The lump sum increases at the rate of three eightieths of salary each year, or £3,000 for a worker on £80,000. This would attract tax at 20pc or £600, leading to a total bill of £3,800 – the equivalent of 4.75p on the rate of income tax. The calculation assumes that salaries rise in line with inflation.
This £16,000 theoretical contribution would be taxed at 20pc if higher-rate relief were abolished, resulting in a tax bill of £3,200 a year. But members of this pension scheme are also entitled to a lump sum, which gives rise to another tax liability.
The lump sum increases at the rate of three eightieths of salary each year, or £3,000 for a worker on £80,000. This would attract tax at 20pc or £600, leading to a total bill of £3,800 – the equivalent of 4.75p on the rate of income tax. The calculation assumes that salaries rise in line with inflation.
It looks like a direct hit at the military to me; as Danny Alexander seems convinced that the military has a non-contributary pension scheme, I guess he thinks that higher rate tax payers in the military would not be hit by the 20% tax-relief restriction to pension contributions. Therefore he's wanting to claw back money another way. Maybe staying on AFPS75 isn't such a good thing after all.
Last edited by LFFC; 2nd Mar 2012 at 08:59.
Apologies for the very slow question - but from this article am I to infer that this would result in an extra tax bill? The article is all about claiming tax relief on pension contributions, which we don't make anyway. So surely from the AFPS perspective this is a hypothetical argument?
Additionally, as you have to physically claim back the higher rate tax relief through the tax return system, surely removing it wouldn't necessarily mean that you had to pay out the extra tax, just that you were no longer able to claim back the tax which would be worth the equivalent of 5p on the rate of income tax?
I have to say that overall, it's a poorly written article, designed to capture public sentiment more than it does accurately reflect the state of affairs. Tax legislation is hugely complex and all they are doing here is over simplifying it for headline purposes. That said, I still think that Danny Alexander is an incredibly dangerous individual if you happen to have any desire to succeed at all in life. I wait with baited breath to see what he tries to tax next.
Additionally, as you have to physically claim back the higher rate tax relief through the tax return system, surely removing it wouldn't necessarily mean that you had to pay out the extra tax, just that you were no longer able to claim back the tax which would be worth the equivalent of 5p on the rate of income tax?
I have to say that overall, it's a poorly written article, designed to capture public sentiment more than it does accurately reflect the state of affairs. Tax legislation is hugely complex and all they are doing here is over simplifying it for headline purposes. That said, I still think that Danny Alexander is an incredibly dangerous individual if you happen to have any desire to succeed at all in life. I wait with baited breath to see what he tries to tax next.
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...am I to infer that this would result in an extra tax bill?
The Government has other options if it wants to cut the amount of money lost to the public purse through tax relief on pensions. It is thought that, instead of abolishing 40pc relief, the Chancellor may restrict how much savers can put in a pension each year.
Currently people can save up to £50,000 tax-free into a pension, but it is understood the Government is considering reducing this annual allowance to £40,000 or £30,000 instead. This could also result in a tax bill for highly paid workers in the public sector.
Currently people can save up to £50,000 tax-free into a pension, but it is understood the Government is considering reducing this annual allowance to £40,000 or £30,000 instead. This could also result in a tax bill for highly paid workers in the public sector.
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Another PA anomaly; two aircrew personnel are selected for PA just before the new pension comes in. One is on AFPS75, but the other is on AFPS05. Will the first still be required to serve for 5 years from acceptance of PA before being pensionable on a PA scale?
As this is not an accrued right (more a penalty), and all post-pension change PA awards will not have the 5 year tie-in, I cannot see how the AFPS75 rules can be enforced.
As this is not an accrued right (more a penalty), and all post-pension change PA awards will not have the 5 year tie-in, I cannot see how the AFPS75 rules can be enforced.
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The PAS pension supplements under AFPS 75 would be the accrued rights in this case, therefore, the individual on that scheme would probably have to complete the 5 yrs RoS to access the supplements earned before the introduction of the FAFPS.
With FAFPS being a career average scheme, those being offered PAS need to weigh up the potential benefits of having all their pension rights up to the new scheme's introduction protected and then starting on a career average scheme at a relatively high starting salary with future incremental progression available. Obviously its relative and future value will depend on what accrual and revaluation rate is agreed with HMT, but it may not be such a bad place to be when the new scheme is introduced.
With FAFPS being a career average scheme, those being offered PAS need to weigh up the potential benefits of having all their pension rights up to the new scheme's introduction protected and then starting on a career average scheme at a relatively high starting salary with future incremental progression available. Obviously its relative and future value will depend on what accrual and revaluation rate is agreed with HMT, but it may not be such a bad place to be when the new scheme is introduced.
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...then starting on a career average scheme at a relatively high starting salary with future incremental progression available
We don't know the time-frame that the career average will be bound by - from 2015 for actual career including pre-2015 service.
We don't know that it would include an incremental progression from 2015 like AFPS75, or more akin to the AFPS05 scheme and it's rights.
We don't know what the PAS rights on PVR would be as the JSP can't reflect an AFPS that hasn't been issued yet.
Too many unknowns. I'd wish those on here would stop hypothesising on an system that has yet to be finalised and announced...unless, of course, you know something that we don't?
The online calculator is great for what we know, but i fear few will make a decision based on that many unknowns, unless the FAPFS is issued interfrastically.
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From the briefings I've attended, the new scheme will not be retrospective as all your previous earnings would be reflected in the pension benefits you would have been earned under AFPS 75 or 05 which will be protected on the introduction of the new scheme. FAFPS will then be based on your pensionable earnings each year from the date of introduction. If you are eligible for incremental progression, such as on the PAS, as the increment would form part of your pensionable earnings your pension would therefore increase accordingly.
If I were still serving, I would take all these rumours with a pinch of salt... The current government have to be VERY careful to not breach EU laws (& lets face it, all EU MEP's vote yearly to enhance their own MULTI hundred pound EURO pensions. Even if a UK MEP has only served for 3 years the unelected bastwerds can take a pension for life of more than an RAF Air Commodore. Hilarious!!
I left the RAF in 1997 as a top of the grade (9 years?) Flt Lt on £27,000. I was immediately employed by the F&CO as the Head of IT for ECCM in Bosnia. My basic salary was £56,000, with a "war zone" allowance & a (as F&CO like to call it) a "per diem" allowance of 30 Dm/day. It equated to approx £86,000 a year in 97/98.
Let me tell you that in 1997 the F&CO used to charter A/C from Heathrow to Geneva with "new recruits" travelling Business Class. Then the next flight was a Swissair flight from Geneva to Sarajevo (Business Class again....). This was when the UK took over the Presidency of the EU.
On arrival I was put up for two nights in a pretty poor B&B. Then suddenly, all the new arrivals were taken out by the existing "Head of Mission - Peter Streams) & his top level staff to a ****ty Mexican restaurant in downtown Sarejevo. All the new "Chiefs" (as we were known) were transferred from our awful B&B rooms to Peter Streams magnificent villa (taken from a Serb Commander by SF) just outside Sarejevo, next to the defunct Volkswagen factory.
After 4 days we had to find our own accomodation in Sarajevo as Mr F&CO decided he wanted his mansion back. 4 months later we were all told that we had to attend a "reception" at his mansion as he had brought his daughter & parents out to Sarejevo (at the taxpayer's cost) for a week. I refused to attend no problem as they relied on me for IT services across Eastern Europe.
What was criminal was that at that reception in Jan/Feb 1998 the F&CO sent a small team out to decide if Bosnia was still a "War Zone" - which it wasn't - to see if he (b*gger his staff) for his extraorninary daily allowances.
So to all you honest people out there, I can assure you that your current "elected" politicians will continue to shaft you whilst it is in their financial personal interests to do so.
Since retiring in 1997 I, personally have been shafted by successive Labour/Tory governments. Thankfully (but sadly) next week I move abroad (permanently) to protect my way of life.
Take care...
I left the RAF in 1997 as a top of the grade (9 years?) Flt Lt on £27,000. I was immediately employed by the F&CO as the Head of IT for ECCM in Bosnia. My basic salary was £56,000, with a "war zone" allowance & a (as F&CO like to call it) a "per diem" allowance of 30 Dm/day. It equated to approx £86,000 a year in 97/98.
Let me tell you that in 1997 the F&CO used to charter A/C from Heathrow to Geneva with "new recruits" travelling Business Class. Then the next flight was a Swissair flight from Geneva to Sarajevo (Business Class again....). This was when the UK took over the Presidency of the EU.
On arrival I was put up for two nights in a pretty poor B&B. Then suddenly, all the new arrivals were taken out by the existing "Head of Mission - Peter Streams) & his top level staff to a ****ty Mexican restaurant in downtown Sarejevo. All the new "Chiefs" (as we were known) were transferred from our awful B&B rooms to Peter Streams magnificent villa (taken from a Serb Commander by SF) just outside Sarejevo, next to the defunct Volkswagen factory.
After 4 days we had to find our own accomodation in Sarajevo as Mr F&CO decided he wanted his mansion back. 4 months later we were all told that we had to attend a "reception" at his mansion as he had brought his daughter & parents out to Sarejevo (at the taxpayer's cost) for a week. I refused to attend no problem as they relied on me for IT services across Eastern Europe.
What was criminal was that at that reception in Jan/Feb 1998 the F&CO sent a small team out to decide if Bosnia was still a "War Zone" - which it wasn't - to see if he (b*gger his staff) for his extraorninary daily allowances.
So to all you honest people out there, I can assure you that your current "elected" politicians will continue to shaft you whilst it is in their financial personal interests to do so.
Since retiring in 1997 I, personally have been shafted by successive Labour/Tory governments. Thankfully (but sadly) next week I move abroad (permanently) to protect my way of life.
Take care...
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I have spent the morning catching up with the DIN (thanks). Its what we expected, as good as it could be under the circumstances and as it explains, the details of FAFPS are still evolving. I think you have to look at the macro perspective and not get fixated on any one specific piece of minutae - everyone knows that an individual's needs are not of as paramount importance as they were before and you no longer have to be considered seditious, unprofessional or in the minority to believe that. I am sure that the MoD wants modern and outward thinking from a workforce that embraces (more) personal responsibility anyway.
The New Employment Model is going as important as the fine detail of FAFPS; such as death in service benefits, ill health/survivor pensions and non financial benefits, as well as anticipating civvy career opportunities. Osborne's intentions in respect of pension commencement lump sums, annual and lifetime allowances, tax relief on all/any pension contributions are also going to be as vital an issue as FAFPS and any (PVR etc) issues that crop up as a consequence of that. From continuing clarification of the generic big picture, the detail for individuals will start to flow naturally.
The New Employment Model is going as important as the fine detail of FAFPS; such as death in service benefits, ill health/survivor pensions and non financial benefits, as well as anticipating civvy career opportunities. Osborne's intentions in respect of pension commencement lump sums, annual and lifetime allowances, tax relief on all/any pension contributions are also going to be as vital an issue as FAFPS and any (PVR etc) issues that crop up as a consequence of that. From continuing clarification of the generic big picture, the detail for individuals will start to flow naturally.
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OK, I just can't help myself - low threshold of understanding.
In broad brush terms: an Air Commodore pension is about £48k pa (after say 35 -37 years service); an MEP pension after about 10 years is about £35k pa. Hilarious? The disparity is the length of service required to accrue those sums. BTW, what is a "MULTI hundred pound EURO pension" (sic)?
The MEP's pension pot to provide that rate is about £250k (this is not the annual pension drawn).
I thought I was doing pretty well in terms of pay when I was made redundant in 1996 and walked straight into a job with BAe in KSA, earning about £50k tax-free. Perhaps I should have tapped the FCO first with my transferable skill set.
You should have stayed longer SAM, the top rate for a flt lt is now in excess of £45k. And BTW (again), which Tory government would it be that shafted you since retirement in 1997? Can you let us all know to which country you are moving - it might affect my travel plans in the future.
Mister B
In broad brush terms: an Air Commodore pension is about £48k pa (after say 35 -37 years service); an MEP pension after about 10 years is about £35k pa. Hilarious? The disparity is the length of service required to accrue those sums. BTW, what is a "MULTI hundred pound EURO pension" (sic)?
The MEP's pension pot to provide that rate is about £250k (this is not the annual pension drawn).
I thought I was doing pretty well in terms of pay when I was made redundant in 1996 and walked straight into a job with BAe in KSA, earning about £50k tax-free. Perhaps I should have tapped the FCO first with my transferable skill set.
You should have stayed longer SAM, the top rate for a flt lt is now in excess of £45k. And BTW (again), which Tory government would it be that shafted you since retirement in 1997? Can you let us all know to which country you are moving - it might affect my travel plans in the future.
Mister B
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AFPS 75 and 3 years free for the Queen...
I'm a little out of the loop at the moment and I wonder if someone could help me with a question. I, along with many others, signed up on AFPS 75 and served for around 3 years before the age of 21 and thus pensionable service.
I understand that at the moment any sort of financial complaint could be met with howls of derision but has any one any information on how this is to be managed? It seems a bit odd that my peers who joined on the same day as me will leave the RAF at their IPP at 38 with their pension but, having served for the same length of time, I will end up with 3 years less pension at 38.
I am not in any way complaining at the AFPS 75 terms and conditions but am a little disappointed that the RAF will take my 3 years non-pensionable service, which I happily served in good faith, and then take away my chance to accrue benefits at the end of my commission.
I've tried to find an answer through the official channels but am a little geographically challenged at the moment with not a single UK forces member in my reporting chain. I suspect that I already know the answer but would appreciate if any one could pass some higher fidelity info....
Regards,
Dash 2
I understand that at the moment any sort of financial complaint could be met with howls of derision but has any one any information on how this is to be managed? It seems a bit odd that my peers who joined on the same day as me will leave the RAF at their IPP at 38 with their pension but, having served for the same length of time, I will end up with 3 years less pension at 38.
I am not in any way complaining at the AFPS 75 terms and conditions but am a little disappointed that the RAF will take my 3 years non-pensionable service, which I happily served in good faith, and then take away my chance to accrue benefits at the end of my commission.
I've tried to find an answer through the official channels but am a little geographically challenged at the moment with not a single UK forces member in my reporting chain. I suspect that I already know the answer but would appreciate if any one could pass some higher fidelity info....
Regards,
Dash 2
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Dash,
Its a bit early for me, so sorry if I'm missing something. You were commissioned at 18, but I'm not sure how your peers will end up with a different pension benefit to you. Reflecting the 3 'non pensionable' years you refer to, AFPS 75's overall accrual rate was l/68th of pensionable pay (1.47%) for officers but only 1/74 (1.35%) for ORs. AFPS 05 has just one accrual rate of 1/70 (1.43%).
Hope that helps? If you like, PM me.
Regards,
Al
Its a bit early for me, so sorry if I'm missing something. You were commissioned at 18, but I'm not sure how your peers will end up with a different pension benefit to you. Reflecting the 3 'non pensionable' years you refer to, AFPS 75's overall accrual rate was l/68th of pensionable pay (1.47%) for officers but only 1/74 (1.35%) for ORs. AFPS 05 has just one accrual rate of 1/70 (1.43%).
Hope that helps? If you like, PM me.
Regards,
Al
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Dash,
AFPS 75 allows a maximum reckonable service for pension purposes of 34 yrs for officers and 37 yrs for ORs, which with a Normal Pension Age of 55 means that pensionable service for offrs starts at 21. All the Scheme's benefits (and costs) are broadly based around those parameters, so any reduction in the age for some would reduce the benefits for all. While this may have suited the employment market and Service needs of the mid-70s (most graduates would have started from age 21) the unfairness was addressed, in part, in AFPS 05 which increased the maximum reckonable service to 40 yrs for all. As you mention you accepted the AFPS 75 terms on initial entry and you would have had the option to transfer to AFPS 05 in 2006 and have those 'missing years' counted. The next change will be following Lord Hutton's recommendation that the cap on pension accrual (i.e. maximum reckonable service for pension purposes) be removed or significantly lifted for all public sector pensions, as well as pension abatement, to fit in with the drive for greater employment flexibility and longer careers. I guess these will be factors in the new scheme.
AFPS 75 allows a maximum reckonable service for pension purposes of 34 yrs for officers and 37 yrs for ORs, which with a Normal Pension Age of 55 means that pensionable service for offrs starts at 21. All the Scheme's benefits (and costs) are broadly based around those parameters, so any reduction in the age for some would reduce the benefits for all. While this may have suited the employment market and Service needs of the mid-70s (most graduates would have started from age 21) the unfairness was addressed, in part, in AFPS 05 which increased the maximum reckonable service to 40 yrs for all. As you mention you accepted the AFPS 75 terms on initial entry and you would have had the option to transfer to AFPS 05 in 2006 and have those 'missing years' counted. The next change will be following Lord Hutton's recommendation that the cap on pension accrual (i.e. maximum reckonable service for pension purposes) be removed or significantly lifted for all public sector pensions, as well as pension abatement, to fit in with the drive for greater employment flexibility and longer careers. I guess these will be factors in the new scheme.
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Rev,
The cynic would suggest that the state likes people working longer not so much because they have the right to do so, but because they are invariably wealthier than young people and can therefore be pinged for more tax. Especially if the Lib Dems succeed in raising the threshold for paying tax on income in this budget to £10000 or so.
With the chipping away at annual and lifetime allowances in pension savings, and the regular slamming shut of tax breaks as George bolsters the Euro defence fund, the truism 'it ain't what you earn, its what you keep' has never rung clearer.
The cynic would suggest that the state likes people working longer not so much because they have the right to do so, but because they are invariably wealthier than young people and can therefore be pinged for more tax. Especially if the Lib Dems succeed in raising the threshold for paying tax on income in this budget to £10000 or so.
With the chipping away at annual and lifetime allowances in pension savings, and the regular slamming shut of tax breaks as George bolsters the Euro defence fund, the truism 'it ain't what you earn, its what you keep' has never rung clearer.
the truism 'it ain't what you earn, its what you keep' has never rung clearer.
Is it just me or does anybody else see the irony in the fact that we have spent much of the past decade fighting for the freedom and independence of subjugated people overseas, whilst all along the Government of the day has effectively been introducing policies that will effectively deny those very individuals that same freedom and independence by pulling the rug out at every available opportunity, inevitably forcing us into relying on a state that, through its actions, seems to believe personal aspiration and success are morally wrong?
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Its not just the direct intervention of the state chipping away at personal wealth, its the indirect consequences as well. QE has eroded the real world value of final salary schemes, and if you wanted an annuity right now.. well.
http://www.napf.co.uk/PressCentre/NA...arch_2012.ashx
http://www.napf.co.uk/PressCentre/NA...arch_2012.ashx
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Pension changes = Change to ToS?
Just out of interest, would a change to the pension that you signed up for constitute a change to your Terms of Service? If so, would you then be entitled to an option point, rather than having to leave under PVR terms?
Any ideas?
Any ideas?
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Pension Changes Ruled Unlawful
The government has lost a legal case over the way it changed the pension scheme for the UK's judges in 2015.
The central London Employment Tribunal has upheld a claim by 210 judges that they suffered age, race or sex discrimination during the change.
When the new, less generous, scheme was introduced, older judges were allowed to stay in their old scheme until they retired or for an interim period.
The tribunal decided this was unlawful discrimination against younger judges.
Judges win claim over pension scheme changes - BBC News
Can anyone see the parallels?
The central London Employment Tribunal has upheld a claim by 210 judges that they suffered age, race or sex discrimination during the change.
When the new, less generous, scheme was introduced, older judges were allowed to stay in their old scheme until they retired or for an interim period.
The tribunal decided this was unlawful discrimination against younger judges.
Judges win claim over pension scheme changes - BBC News
Can anyone see the parallels?
