New pension finalised
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EDP?
I can not find the info I am looking for so hope someone in the know can help. I am on AFPS 75 and due to reach IPP in 2018. This means I will have done 16 years towards my pension. As I move over to AFPS 15 in 2015 only 13 of those years will come under the AFPS 75 terms. Will I still get the remaining 3 years on the new scheme or is the qualifying period 20 years? If that is the case will my final 3 years not count towards any pension if I leave at 16 years?
This leads to another question. If a Commission is terminated at 16 years but pension only paid out after this time, is it a sneaky way to reduce the pension bill and do you think it will affect recruitment if those joining know there is a good chance they will not get an immediate pension when their Commission ends (providing they don't get FTC)?
This leads to another question. If a Commission is terminated at 16 years but pension only paid out after this time, is it a sneaky way to reduce the pension bill and do you think it will affect recruitment if those joining know there is a good chance they will not get an immediate pension when their Commission ends (providing they don't get FTC)?
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up to 2015, you will get what you were owed, when you were owed it you will get your proportion of 75 up to 2015, so minor change for you... probably will still be around 80-85% of what you were expecting. be more fearful of redundancy 1 week before your 38 point...
I'm still confused about what happens to the AFPS75 bit once we transfer over to 15.
Student Officer Smith finishes Cranwell in 2003 as a 23 year old Fg Off and picks up his Flt Lt in 2004. Flt Lt Smith does 12 years on AFPS75 terms then transfers to AFPS15 in 2015 as level 8 Flt Lt.
He continues to serve and gets some good news in 2016 and gets promoted to Sqn Ldr then continues to serve before deciding to leave in 2022 (age 42). His final pay level is Sqn Ldr level 7.
The protected bit of his AFPS75 benefits are payable immediately since he did 16 years total but is this calculated as:
A: 12/16th of his Flt Lt level 8 IP (which is the best 12 months of pay he was on when he transferred out of AFPS75)
or
B: 12/16th of his Sqn Ldr level 7 IP (which is the best 12 months of pay, earned under continuous service but not under AFPS75 terms)
The pension society brief seems to suggest it's A, which sucks... A lot. If 'A' is right then there's very little incentive to seek promotion out after the transfer since the bulk of his pension is now forever frozen at the Flt Lt rate and what he does earn under AFPS15 won't be payable until age 60 anyway.
There seems to be a huge push factor for our intrepid 'Smith' to cut and run early for a second career. It gets even worse for those who have done closer to 16 years under AFPS75.
Student Officer Smith finishes Cranwell in 2003 as a 23 year old Fg Off and picks up his Flt Lt in 2004. Flt Lt Smith does 12 years on AFPS75 terms then transfers to AFPS15 in 2015 as level 8 Flt Lt.
He continues to serve and gets some good news in 2016 and gets promoted to Sqn Ldr then continues to serve before deciding to leave in 2022 (age 42). His final pay level is Sqn Ldr level 7.
The protected bit of his AFPS75 benefits are payable immediately since he did 16 years total but is this calculated as:
A: 12/16th of his Flt Lt level 8 IP (which is the best 12 months of pay he was on when he transferred out of AFPS75)
or
B: 12/16th of his Sqn Ldr level 7 IP (which is the best 12 months of pay, earned under continuous service but not under AFPS75 terms)
The pension society brief seems to suggest it's A, which sucks... A lot. If 'A' is right then there's very little incentive to seek promotion out after the transfer since the bulk of his pension is now forever frozen at the Flt Lt rate and what he does earn under AFPS15 won't be payable until age 60 anyway.
There seems to be a huge push factor for our intrepid 'Smith' to cut and run early for a second career. It gets even worse for those who have done closer to 16 years under AFPS75.
Last edited by Stuff; 29th Oct 2012 at 20:56.
Money is on 2016, albeit there was a hastily withdrawn note recently that had 2017 on it. There was talk of 2015 for new entrants only (like they did for AFPS 05) but not seen anything with that written on it for a while. We are told that a bunch of information will be out by March with the calculator going live for regular folk the following month.
In truth the rumour mill has as much information in it as the formal stuff. The 'Senior Leadership Team' got their lines to take in the last couple of weeks.
In truth the rumour mill has as much information in it as the formal stuff. The 'Senior Leadership Team' got their lines to take in the last couple of weeks.
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Dear Stuff,
I understand that due to accrued rights the portion earned on AFPS 75 retains its finally salary (ie rank) link, even if promoted when on AFPS 15. So, in the case you describe, Smith would get the AFPS 75 portion of his pension, at Sqn Ldr rate, when he expected to get it (his leaving point age 42).
I stand to be corrected by the great and the good though.
I understand that due to accrued rights the portion earned on AFPS 75 retains its finally salary (ie rank) link, even if promoted when on AFPS 15. So, in the case you describe, Smith would get the AFPS 75 portion of his pension, at Sqn Ldr rate, when he expected to get it (his leaving point age 42).
I stand to be corrected by the great and the good though.
Randomblah not so random on this occasion. Sqn Ldr Smith gets 12/16ths of a Level 7 Sqn Ldr AFPS75 immediate pension straight away on leaving. Then, at age 60 he gets his AFPS15 pension, 1/47th of his pensionable salary for each of those 7 years served after changeover.
From the before mentioned Forces Pensions Society piece at Post #9...
It appears to infer that you get the reduced AFPS75/05 at or after your Initial Pension Point (IPP) following 2015 and if you have also cracked the 20 year IPP of AFPS15 (including your AFPS75/05 time) then you appear to get a 1/20th of what you expected for each year you work after 2015.
I've highlighted the interesting bits in BOLD. VoxPop - is that correct?
LJ
Let’s now look at some of the most important elements of the proposed scheme and how it will operate in practice.
The accrual rate of 1/47th is very strong. What this means is that your annual pension award accumulates by 1/47th of your pensionable salary each year. For example if you were a Sergeant in receipt of a salary of £36,437, then your annual pension award would be £775.26 for that year’s service. If the same Sergeant received a salary of £37,412 for the following year, then the annual pension earned for that year would be £796.00.
The previous years’ earned pension will be revalued annually by an Average Earnings Index (AEI). There is more than one AEI, but it is understood the MoD will look to use the National AEI as the fairest index for the purpose of increasing the value of previous years’ earned pension. So, to take our Sergeant’s awards calculated in the previous paragraph, together with an assumption that the AEI was 2.6% for the first year, the first year’s award of £775.26 would grow to £795.42. It is the revalued figure of £795.42 that is then added to the £796.00 at the end of the second year, to give a new total value of annual pension award of £1,591.42.
To take the example one step further, if the Sergeant were subsequently promoted to Staff Sergeant three months into the next year, and received a salary of £38,237 for that year, and the AEI at the end of the second year was 3.1%, he would have earned a a further £813.55 (£38,237/47) towards his overall pension entitlement and his £1,591.42 would be revalued to £1,640.75 which, when added to the £813.55, gives the Staff Sergeant a new annual pension award of £2,454.30.
This may seem more complicated than the basic final salary schemes of AFPS75 and AFPS05, so how can an individual be expected to keep up with his or her pension entitlement. Well, apart from there being an online calculator available (it’s on its way), every serving individual will receive an annual statement of their current pension entitlement as a matter of course – something that you have been entitled to, but denied, for too long! This will remove the need to carry out these calculations yourself. That said, individuals should still be conversant with the processes carried out that lead to the forecast they receive.
To carry on with our Staff Sergeant’s career... Let’s assume that on the day of inception of the new scheme, he had completed 19 years’ reckonable service on the AFPS75 pension scheme, and will leave the Army after 22 years’ reckonable service on 6th April 2018. This means that there is going to be a split pension award on exit – some AFPS75 and some AFPS15. I will deal with the AFPS75 entitlement first.
Even though the Staff Sergeant will not have completed 22 years’ reckonable service on the date the new pension scheme started, he would, on his day of exit, have achieve that amount of service in total, albeit with 3 years of that service under the new pension scheme rules. Therefore, since 22 years’ service will be attained, he will receive an immediate pension and lump sum award on exit under the AFPS75 pension scheme rules.
The rules of AFPS75 state that an individual must complete at least 2 years’ reckonable service in the substantive rank in order to receive a full pension for that rank; if they complete at least 12 months’ reckonable service in the substantive rank, there will be a proportionate increase in the pension award based on the rates payable for each of the two ranks.
Unfortunately, as our Staff Sergeant did not complete 12 months’ reckonable service in the substantive rank, his AFPS75 pension award will be based on that of a Sergeant for the full 19 years.
The current annual pension award after 22 years’ service for a Sergeant is £10,509; therefore the award of a pension payable immediately on exit under AFPS75 would be 19/22nds of the £10,509 (£9,075.95) and a lump sum of 3 times that figure (£27,227.85).
What of the small pension earned under AFPS15? Assuming our Staff Sergeant is 41 on exit and has completed over 20 years’ service, his full pension becomes a deferred pension payable from State Retirement Pension Age. However, because he is aged 40 or over and has completed at least 20 years’ reckonable service, he qualifies to receive EDP payments.
The amount of EDP income stream payable is based on 34% of the pension earned plus 0.85% for each complete year beyond the EDP qualifying point. Our Staff Sergeant reached his EDP point at age 40 (he had completed 21 years’ reckonable service then), so given that he has completed one further year beyond his EDP qualifying point he will receive an EDP income stream of 34.85% of £2,454.30 (£855.32). Please note that you only need to hold the rank for one day and that one day’s salary in the higher rank is pensionable under the new AFPS15 scheme rules.
The amount of EDP lump sum is equal to 2.25 times the value of the pension pot. This means £2,454.30 x 2.25, equals £5,522.18. So, the overall award on exit for our Staff Sergeant is a lump sum equal to (£27,227.85 + £5,522.18) £32,750.03 and a total pension/income stream until State Pension Age of (£9,075.95 + £855.32) £9,931.27.
At State Pension Age the EDP income stream stops and the proper pension becomes payable. Our Staff Sergeant has a choice of taking all the pension in income, so the total pension would increase to (£9,075.95 + £2,454.30) £11,530.25, or he can surrender (up to) 25% of the AFPS15 pension and buy another lump sum at this point. If he did that, then for every £1 of annual pension surrendered, a £12 lump sum is paid. Surrendering 25% of £2,454.30 (£613.57) would buy a lump sum of £7,362.84, and the pension at State Pension Age would only be (£9,075.95 + £1,840.71) £10,916.66.
The accrual rate of 1/47th is very strong. What this means is that your annual pension award accumulates by 1/47th of your pensionable salary each year. For example if you were a Sergeant in receipt of a salary of £36,437, then your annual pension award would be £775.26 for that year’s service. If the same Sergeant received a salary of £37,412 for the following year, then the annual pension earned for that year would be £796.00.
The previous years’ earned pension will be revalued annually by an Average Earnings Index (AEI). There is more than one AEI, but it is understood the MoD will look to use the National AEI as the fairest index for the purpose of increasing the value of previous years’ earned pension. So, to take our Sergeant’s awards calculated in the previous paragraph, together with an assumption that the AEI was 2.6% for the first year, the first year’s award of £775.26 would grow to £795.42. It is the revalued figure of £795.42 that is then added to the £796.00 at the end of the second year, to give a new total value of annual pension award of £1,591.42.
To take the example one step further, if the Sergeant were subsequently promoted to Staff Sergeant three months into the next year, and received a salary of £38,237 for that year, and the AEI at the end of the second year was 3.1%, he would have earned a a further £813.55 (£38,237/47) towards his overall pension entitlement and his £1,591.42 would be revalued to £1,640.75 which, when added to the £813.55, gives the Staff Sergeant a new annual pension award of £2,454.30.
This may seem more complicated than the basic final salary schemes of AFPS75 and AFPS05, so how can an individual be expected to keep up with his or her pension entitlement. Well, apart from there being an online calculator available (it’s on its way), every serving individual will receive an annual statement of their current pension entitlement as a matter of course – something that you have been entitled to, but denied, for too long! This will remove the need to carry out these calculations yourself. That said, individuals should still be conversant with the processes carried out that lead to the forecast they receive.
To carry on with our Staff Sergeant’s career... Let’s assume that on the day of inception of the new scheme, he had completed 19 years’ reckonable service on the AFPS75 pension scheme, and will leave the Army after 22 years’ reckonable service on 6th April 2018. This means that there is going to be a split pension award on exit – some AFPS75 and some AFPS15. I will deal with the AFPS75 entitlement first.
Even though the Staff Sergeant will not have completed 22 years’ reckonable service on the date the new pension scheme started, he would, on his day of exit, have achieve that amount of service in total, albeit with 3 years of that service under the new pension scheme rules. Therefore, since 22 years’ service will be attained, he will receive an immediate pension and lump sum award on exit under the AFPS75 pension scheme rules.
The rules of AFPS75 state that an individual must complete at least 2 years’ reckonable service in the substantive rank in order to receive a full pension for that rank; if they complete at least 12 months’ reckonable service in the substantive rank, there will be a proportionate increase in the pension award based on the rates payable for each of the two ranks.
Unfortunately, as our Staff Sergeant did not complete 12 months’ reckonable service in the substantive rank, his AFPS75 pension award will be based on that of a Sergeant for the full 19 years.
The current annual pension award after 22 years’ service for a Sergeant is £10,509; therefore the award of a pension payable immediately on exit under AFPS75 would be 19/22nds of the £10,509 (£9,075.95) and a lump sum of 3 times that figure (£27,227.85).
What of the small pension earned under AFPS15? Assuming our Staff Sergeant is 41 on exit and has completed over 20 years’ service, his full pension becomes a deferred pension payable from State Retirement Pension Age. However, because he is aged 40 or over and has completed at least 20 years’ reckonable service, he qualifies to receive EDP payments.
The amount of EDP income stream payable is based on 34% of the pension earned plus 0.85% for each complete year beyond the EDP qualifying point. Our Staff Sergeant reached his EDP point at age 40 (he had completed 21 years’ reckonable service then), so given that he has completed one further year beyond his EDP qualifying point he will receive an EDP income stream of 34.85% of £2,454.30 (£855.32). Please note that you only need to hold the rank for one day and that one day’s salary in the higher rank is pensionable under the new AFPS15 scheme rules.
The amount of EDP lump sum is equal to 2.25 times the value of the pension pot. This means £2,454.30 x 2.25, equals £5,522.18. So, the overall award on exit for our Staff Sergeant is a lump sum equal to (£27,227.85 + £5,522.18) £32,750.03 and a total pension/income stream until State Pension Age of (£9,075.95 + £855.32) £9,931.27.
At State Pension Age the EDP income stream stops and the proper pension becomes payable. Our Staff Sergeant has a choice of taking all the pension in income, so the total pension would increase to (£9,075.95 + £2,454.30) £11,530.25, or he can surrender (up to) 25% of the AFPS15 pension and buy another lump sum at this point. If he did that, then for every £1 of annual pension surrendered, a £12 lump sum is paid. Surrendering 25% of £2,454.30 (£613.57) would buy a lump sum of £7,362.84, and the pension at State Pension Age would only be (£9,075.95 + £1,840.71) £10,916.66.
I've highlighted the interesting bits in BOLD. VoxPop - is that correct?
LJ
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Dear Easy Street,
In this case wouldn't the Sqn Ldr start getting his AFPS 15 pension at age 67? I thought that only an individual who completed a full career (ie age 55 for officers as I write) started recieving their AFPS 15 pension at age 60- leave any earlier and you would start to get it at state retirement age.
In this case wouldn't the Sqn Ldr start getting his AFPS 15 pension at age 67? I thought that only an individual who completed a full career (ie age 55 for officers as I write) started recieving their AFPS 15 pension at age 60- leave any earlier and you would start to get it at state retirement age.
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Bob Viking:
Bob, I do have rough figures but they shouldn't cloud your own individual decision if presented with the choice next year. On the last board, it was a hollow carrot being dangled - 5-yr RoS, loss of 38-pt option, no known pension deal and end of FRI in 2013. The pension is becoming clearer, and one can only hope that one/any of those other factors change for the better to aide the decision-making of those offered on the next board.
On any respect, who knows where PAS will lie in the NEM...
Do you have any info' regarding the numbers of PAS? I know of a couple of people who turned it down and I may be making a similar decision myself in the new year.
On any respect, who knows where PAS will lie in the NEM...
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which rank is the pension paid in
" The pension society brief seems to suggest it's A, which sucks..."
I can confirm that the AFPS 75 part of pension is paid in the rank at the time of retirement.
I have checked our brief and that is what it says. The slide is a bit 'busy' so I will redesign it to make it clearer.
I can confirm that the AFPS 75 part of pension is paid in the rank at the time of retirement.
I have checked our brief and that is what it says. The slide is a bit 'busy' so I will redesign it to make it clearer.
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those who serve over 20 yrs
"What of the small pension earned under AFPS15? Assuming our Staff Sergeant is 41 on exit and has completed over 20 years’ service, his full pension becomes a deferred pension payable from State Retirement Pension Age. However, because he is aged 40 or over and has completed at least 20 years’ reckonable service, he qualifies to receive EDP payments. "
I confirm that LJ is quite correct.
I confirm that LJ is quite correct.
Last edited by Voxpop; 30th Oct 2012 at 08:50. Reason: difficult to read due to use of colour
Antelope - Unless Smith gets offered some form of extension of service I think he would have to leave. If he had done 38/16 he'll be entitled to some sort of IP from whatever part of service was under the 75 scheme.
Perhaps the New Employment Model will give some additional options to manning other than the just assimilation to age 55 and he might benefit from that but we'll have to see what NEM brings first.
Voxpop - Thank you very much.
Perhaps the New Employment Model will give some additional options to manning other than the just assimilation to age 55 and he might benefit from that but we'll have to see what NEM brings first.
Voxpop - Thank you very much.
Last edited by Stuff; 30th Oct 2012 at 17:06.
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The new one might be finalised, but what about a possible 'next'? The report writers lean to the right and might have an agenda, but does that make the message less valid? I don't think so. The Martin Baker clause in AFPS15 has been all but screaming for the past 12 months or so.
In case I get a dig for simply looking for bad news/an angle, I'm not. The bad news is already out there, it just isn't particularly widely known. If people have as many facts/informed opinion as possible, they can start planning properly.
I think this will creep up and bite people on the backside and thats the thing that annoys me.
The cashflow crisis for AFPS/public sector pensions? - Echelon Wealthcare
In case I get a dig for simply looking for bad news/an angle, I'm not. The bad news is already out there, it just isn't particularly widely known. If people have as many facts/informed opinion as possible, they can start planning properly.
I think this will creep up and bite people on the backside and thats the thing that annoys me.
The cashflow crisis for AFPS/public sector pensions? - Echelon Wealthcare
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Forced onto new pension scheme = change to terms of service?
I made my current commitment (PAS) to the RAF because I enjoy the lifestyle and the job, but the financial aspects were obviously a consideration when I decided to sign on. I, like many of my friends, fall outside the '10 years to go' point when you can remain on the current scheme and I feel is grossly unfair and ageist. I cannot help but think that any forced change to our pensions represents a fundamental change to our terms of service.
I'm not sure that the government can actually do this without our consent, as it has financial implications for most of us. I'm not an expert in employment law, but I would be interested to hear from anyone with experience in this field or from anyone in a similar situation.
I'd like to see the option to either remain on our current scheme, accept the new scheme or leave without prejudice be made available to anyone who's pensionable engagement takes them beyond 2015.
I'm not sure that the government can actually do this without our consent, as it has financial implications for most of us. I'm not an expert in employment law, but I would be interested to hear from anyone with experience in this field or from anyone in a similar situation.
I'd like to see the option to either remain on our current scheme, accept the new scheme or leave without prejudice be made available to anyone who's pensionable engagement takes them beyond 2015.