FAFPS 2015

[downsizer]

In 2015 I'll have done 19 under '75....

If I stay till my 22 year point in 2018 am I right in thinking I'll get 19 years worth of IP and lump sum from '75 and 3 years worth of EDP and lump sum from '15. Followed by a bigger element from '15 at 68? FFS its not simple is it...

[rock34]

Cheers, thanks for answering that.

Al R - formerly Feu de Fer!

[Lima Juliet]

It's a little unclear for FTRS as it states that FAFPS will only pay out at or after the proposed 20/20 point. With some FTRS taking contracts at age 40 or above, does that mean working to a 20 year point or wait until age 65 when most FTRS retire age 60?!

If it is as before, where RFPS05 paid 1/70th of final pensionable salary and FAFPS pays 1/47th of final pensionable salary, then I am very much "quids in" and my pension at 60 for my FTRS time will be £16k under FAFPS whereas under RFPS05 it would be £10.7k!

I managed to answer this via the excellent videos posted by the FAFPS Team on the Defence Intranet. Basically, anyone, including those that have not done 20yrs, will get an immediate "full career pension" if they serve to age 60yrs (the NPA). However, there is no lump sum unless you commute under the surrender £1 pension for £12 lump sum rule (1:12 rule).

Anyhoo, I ran the numbers for my current 2005 pension over FAFPS for the same period and for those that go the distance to age 60 it should be good news:

2005 Pension for me would realise £10.7k pension and a £32.1k lump sum at age 60

FAFPS Pension for me would realise £13k pension and a £36k lump sum (under a 1:12 commute) at age 60

So, happy days for some for others not

I then thought, hang on, they're supposed to be saving money. How are they doing this? Well fewer make it to the "final post" of 60 than leave at 40-something, and the majority will get paid less during the transition period so it will save in the short/medium term - that is what the Govt is trying to do.

I must admit, I also like the idea of flexible lump sum payments as most don't need lump sums, but a regular income at or above age 60 (kids have left and house is probably all but paid for).

LJ

[kweelo]

Al -


there are clearly a lot of confused people out there, including myself and I don't expect you to answer everyone's personal circumstance here. I have today joined the FPS in the hope that after the consultation period they will hopefully be able to give me (and others!)some clear guidance. I definitely need it!

I am an OR on AFPS 75 and on FAFPS changeover will have completed 28 yrs of my LOS 30. Having read the consultation document today and again being just as confused reading through that, I was heartened to read that the accrued rights you have banked are save.

To that end, I read in to it (or maybe hoped!) that I will have banked 28/30ths of my AFPS 75 pension and that at the end of my 30 years’ service I will be able to collect my gratuity (having commuted), reduced immediate pension and that at age 55 my pension will revert to its original value, including CPI rise- as that is what I would have 'banked' under the old scheme and that 2/30ths FAFPS will be payable to me at age 60, as per the BBC website article yesterday. I haven't read or indeed have missed possibly that the portion earned under the new scheme will be paid at the new state pension age of 68, which you have suggested?

[Al R]

Kweelo,

Firstly, do you qualify for transitional protection - are you within 10 years of 75's normal pension age of 55?

"The Government has offered transitional protection for all members of public service pension schemes who were within ten years of their respective scheme’s Normal Pension Age (NPA) on 1 April 2012. The Armed Forces Pension Schemes 1975 and 2005 (AFPS 75 and AFPS 05) and the Full Time Reserve Service Pension Scheme 1997 (FTRS 97) (Full Commitment) have a NPA of 55. This means that if an individual is a member of AFPS 75, AFPS 05 or FTRS 97 (FC) and was aged 45 or over on 1 April 2012 (i.e. born on or before 1 April 1967), they will remain in their current pension scheme and their benefits will be unaffected."

You will have served beyond your gratuity/IP point of AFPS 75 and beyond the FAFPS EDP point. As you say, you will get 28/30 of AFPS 75 benefits and you should also get tax free cash and EDP benefits from FAFPS (which involves a commutation also, at a rate of 12:1).

At 55, your pension will be increased by the retrospective and compounding effect of CPI since you left and when you reach your Deferred Pension age (67/68 for you?), your FAFPS annual pension will increase. At this point, you can commute some of your newly increasing annual FAFPS Pension to generate a lump sum.

Calculating your State Pension age : Directgov - Pensions and retirement planning

[blagger]

My 38/16 is a few weeks before the 1 Apr 15 date luckily. However, I think I'm right in saying people like me would have to do at least 4 years of FAFPS to get to 20 years to get anything extra than the AFPS75 16 year IP before Age 68??

I'm also wondering how taking an option vs PVR will work - if my 16 years of AFPS75 is frozen will the frozen amount be reduced by going on PVR post my option point as I leave on PVR rates? This effect used to be balanced by the AFPS75 IP growing with extra years of service but if it freezes it can't grow?

[Albert Another]

Thanks to all those posting here who are helping to answer questions. I’m going to take the weekend to Deliberate, Cogitate and Digest the outlined new pension scheme. The examples in the outline document are very helpful. However, it would have been useful to have some examples for personnel leaving at aged 55 formally under AFPS 75. My initial feelings and questions are:

AFPS 75, PAS, planning to retire at 55 after 35 years of service.

1) The FAFPS EDP monthly income and lump sum may not be as bad as first feared (lots of maths need over the coming days to confirm). The 1/47th accrual rate is good news.

2) I understand I have the ability to take the FAFPS pension at 55 which was a critical requirement for me. Although the amount it will be actuarially reduced is still a big unknown to the financial impact of leaving at 55. I do not plan to stay until 60 because at 60 I am considerably less employable in civi street and after 35 year of service I desire a less unpredictable lifestyle.

3) My second major concern I have is if I had to PVR prior to age 55 would I have to wait until 66/67/68 to get the full benefits from the FAFPS? Currently under AFPS 75 I would receive the full pension immediately. For example if I had to PVR at aged 50 would I now have to wait 16+ years for the full FAFPS benefits? This is a huge financial loss and a lot worse than for those on AFPS 05 as I think they already had to wait until age 65. This basically creates an unwanted stay until 55 or go before 2015 decision.

If anyone can clarify or expand on these points it would be much appreciated.

[Al R]

Albert,

3) My reading (still reading it and absorbing it too) is that if you leave at 50 (eg) then although you get '75 benefits straightaway, you would have to wait until 66/67/68 for the full FAFPS income. Unless you have also ticked the 20/40 (which you will have I assume!) box for FAFPS in which case you'd also get FAFPS tax free cash/EDP when you leave at 50 (and more commutable FAFPS income at 66/67/68).

[Just This Once...]

Under current rules you can leave with 6 month notice, with no financial or PVR pension abatement if:

i. You are aged 50 or above

and

ii. Have completed 30 years of service.

The new FAFPS seems to undermine this right but it is one of the issues that span both pensions and the new ToS under the New Employment Model.

Another big question I guess.

[Lima Juliet]

Albert

I think a lot will hang on the New Employment Model (NEM). If we retain age 55 for a full career pension and retirement then you won't have to go past 55 (I think this is unlikely though and the NPA of 60 is going to be set). I suspect it will be go to age 60 (which is likely under NEM) to get a FAFPS pension without doing 20 years and don't forget that you will get an immediate pension if you are unable to continue service under medical grounds with a disability pension regardless of how many years you have served (with the same rights as AFPS05).

If it were me I would serve another 5 years past 55yrs to get a full career pension on FAFPS plus my protected AFPS75/05 pension, rather than leave at 55 and have to wait 17 years for the rest. But that is my opinion.

LJ

[Backwards PLT]

Albert

I am looking at a similar scenario, but the difference is I will welcome an extension to 60. As I understand it, the working until 60 has not been categorically stated yet, although it is implied, but I suspect that will come out when NEM is announced.

The reason that I welcome an extension to 60 is that it means that I don't need to get another job at 55 - I can retire properly at 60. Those extra 5 years on a good wage and an extra 5/47 of approx 75k (top tier PAS, averaged etc etc) = 8k /annum extra pension make all the difference.

EDIT: One question I do have, assuming a retirement at 60 is introduced - the current info states that benefits under AFPS 75/05 will be paid when you would expect them to be ie no change. Does this mean that I would still be in the military, working to 60 but get a lump sum at 55 and my AFPS 75 pension??? Or could I defer it to 60 and have it "actuarily adjusted"?

[Albert Another]

Thank you for the replies to my post.

Al R: That’s the way I read it as well. ‘Under existing regulations an actuarially reduced pension is payable within 5 years of the current NPA’. That means if the NPA goes up to age 60 then if you leave at 50 you are outside the 5 years so you only get a FAFPS tax free cash/EDP (and more FAFPS income at 66/67/68!!!). That is a very large change in conditions for those on AFPS 75. If the NPA stays at 55 then you could still leave at age 50 with an immediate full pension (actuarially reduced). Hence, the stay until 55 or go by 2015 quandary.

Leon: I read it slightly differently. In the Key Points on page 8 and under Full Pension Entitlement on page 11 it says ‘Under existing regulations an actuarially reduced pension is payable within 5 years of the current NPA’. So if the NPA stays at 55 the pension is not actuarially reduced. However, if the NPA goes up to 60 I can still leave at age 55, get an immediate full pension but it will be actuarially reduced (a low reduction rate is crucial though).

Backwards PLT: The NPA is a critical factor. I have not heard any timelines for when it will be set. Obviously it needs to be fairly soon so we can all make informed choices. It then must not change for at least 25 years, as any later rise to say 65 would, be catastrophic to any financial / life plans.

[Reverend 71]

Normal Pension Age of 60

The move to a Normal Pension Age of 60 for the uniformed services was recommended by Lord Hutton and this was accepted by the Government last year. Therefore, the Normal Pension Age for FAFPS will be 60. How single Service TCOS will change to accommodate this is not certain and will be part of the NEM process.

[BlindWingy]

Maths was never my strong point, but I’ve had a go with the calculator....

AFPS75? Leaving as planned at 16/38? Average UK life expectancy of 80 years?
Historically, you would have collected about £565 064 post 38/16 point. (Ignoring CPI)

Now, if you leave as planned after the changeover...you get your accrued rights( eg X/16ths of the figure above) and the rest at NPA age 60. So you will lose:
If 1 year left at changeover : -£2354 from Terminal Grant-£785/year for 22 years (age 60) = £19624

If 3 years left at changeover: -£7062 from Terminal Grant-£2355/year = £58 872

If 5 years left at changeover: -£11770 from Terminal Grant-£3925/year = £98 120
Anybody have issues with these calculations?

[alfred_the_great]

On the basis '15 was introduced on the premise that '75 and '05 were unaffordable, that sounds like it's doing the job it was designed to do.

[BlindWingy]

Tell that to somebody who's heading to Afghanistan.

[FJ2ME]

Does anyone know if the new pension rule of 'from first day of paid service' in the armed forces' would take account of service as a VR before joining full time? If so, those facing a short fall between 2015 and 38/16 point may qualify for 20 years service under FAFPS at their normal 38/16 point by adding time served as a Volunteer Reservist before joining as a regular-ie University sponsored cadets, TA members, or VGS VRs...as were committed to employment, then it really should qualify and all those sorts of people were in 'paid service'...food for thought...

[81mm]

Or time spent as a NCO before commission / service change?

[Voxpop]

Volunteer Reserve Service

Only reserve service which counted in AFPS 75 (prior to 6 April 2005) or in RPFS can be counted. For the former you had to have left with an immediate or preserved AFPS pension and been called out for a national emergency or mobilised under S32, 43,52, 54 or 56 or the Reserved Forces Act 1996 (or corresponding section of the 1980 Act). For the latter the provision of the 1996 Act apply.

In 2006-ish the MOD fought and won a prolonged legal challenge about the non-pensionable status of reserve service which did not meet the above test and I cannot see them conceding now that it can count for pension.

Readers who want their position under the new scheme setting out for them in plain language might like to visit the Forces Pension Society website (Forces Pension Society - Fighting for the Forces and their Families) and join us on line. Our Help Desk is experienced in demystifying pensions for our members and, of course, having been closely monitoring the development of the new scheme, understand what is proposed.

[Al R]

Forces Pensions Society et al, keeping the pressure on.

Call for rethink over officer pensions - Echelon Wealthcare