New Pension Calculator
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New Pension Calculator
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Now that is interesting. It won't let you put in becoming PA in the future, so it still remains v hard what the new pension will do to you if you are likely to be offered PA after 2015...
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In a different sense, all hell could break loose soon anyway. Due to (for instance) the lowering of the lifetime allowance, it is making increasing sense for the younger/higher paid in the public sector to consider the pros and cons of transfering their 'pots' into alternative, quite esoteric personal pension schemes. There is one in particular which is doing roaring business with NHS Consultants. The age old maxim that the public sector scheme offers you stability still rings true, absolutely, but there are now more factors at play.
In addition, the HMRC consultation on QROPS announced the other day is going to limit options for any casual scheme member looking to outflank the regulations but with increased uncertainty in the world of defined benefit/CARE public sector schemes.. what to do?
HM Revenue & Customs: Pensions: Draft QROPS Regulations 2013
Flavour of the month right now, in compliancy and regulatory terms is pension busting and nearly all of it is contrary to the spirit of pension legislation and is therefore likely to result in a pension buster ('penster' - there, just made that one up) losing a lot of money for a variety of reasons. However, a senior public sector worker has (recently) become the first penster to successfully release his pension from his unfunded pension fund in a particular way that has nothing to do with working with shady companies or the scenario in Para 1.
It took him over a year to do it and he received all manner of threats of prosecution, HMRC landing on his doormat etc. If that is seen to have successfully set a precedent and if the principle is successfully applied elsewhere (ie; within another scheme) then the public sector pension landscape changes.
In addition, the HMRC consultation on QROPS announced the other day is going to limit options for any casual scheme member looking to outflank the regulations but with increased uncertainty in the world of defined benefit/CARE public sector schemes.. what to do?
HM Revenue & Customs: Pensions: Draft QROPS Regulations 2013
Flavour of the month right now, in compliancy and regulatory terms is pension busting and nearly all of it is contrary to the spirit of pension legislation and is therefore likely to result in a pension buster ('penster' - there, just made that one up) losing a lot of money for a variety of reasons. However, a senior public sector worker has (recently) become the first penster to successfully release his pension from his unfunded pension fund in a particular way that has nothing to do with working with shady companies or the scenario in Para 1.
It took him over a year to do it and he received all manner of threats of prosecution, HMRC landing on his doormat etc. If that is seen to have successfully set a precedent and if the principle is successfully applied elsewhere (ie; within another scheme) then the public sector pension landscape changes.
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Just done the sums and my final pension at age 55 on AFPS using Old Pension Calculator version 9.2 versus new AFPS Calculator reflects a 3.1K annual decrease in pension at age 55! Bugger!
However, shows a 5K increase at State Pension Age (67).
Essentially, must cut down on the red vino!
However, shows a 5K increase at State Pension Age (67).
Essentially, must cut down on the red vino!
I know I'm being a biff and need to get financial advice from the FPS.
On the new calculator (i intend taking max communtation and am on AFPS75) I understand my communtation lump sum which I will add to my lump sum at exit - to produce one final lump sum, my reduced immediate pension until aged 55 and then my reduced deferred pension until SPA. What is - 'Increased AFPS 15 EDP income by commutation'?? Is this not applicable because I am opting for maximum commutation?
Any help greatly appreciated, I'm hoping there will be some form of briefings that will help explain in greater details.
Thanks
On the new calculator (i intend taking max communtation and am on AFPS75) I understand my communtation lump sum which I will add to my lump sum at exit - to produce one final lump sum, my reduced immediate pension until aged 55 and then my reduced deferred pension until SPA. What is - 'Increased AFPS 15 EDP income by commutation'?? Is this not applicable because I am opting for maximum commutation?
Any help greatly appreciated, I'm hoping there will be some form of briefings that will help explain in greater details.
Thanks
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Kweelo,
Your '75 benefits will be treated seperately to those which you wil start to grow iaw '15. The amount that you may commute is expressed as the amount of cash in your notional pot that is surrendered in exchange for each extra £ you wish to take. The higher the Commutation Factor of the scheme (all are different), the less 'pot' you will have to surrender in exchange for cash upfront and that has a big impact, especially later on in retirement.
Each pension scheme sets out ‘cash commutation factors’ that determine the rate at which annual income is converted into a lump sum. Anyone retiring today needs to check these factors to check whether taking a lump sum makes sense - AFPS 15 allows you to transfer up to £12 per £1 per annum (up to HMRC limits).
Taking max commutation isn’t always the best option though. More of late, calculations used to swap an ongoing annual income for a lump sum today haven’t kept pace with changes in financial markets so you may be getting less than the true value of the pension you give up.
Yes, once the money is yours it can’t be taken away and it is tax free and you might need it to pay off a mortgage, yes – they are all credible reasons for maxxing out your the commuted lump sum. But be careful not to underestimate the value of having a guaranteed AFPS income for life that increases with inflation and provides for a partner after your death.
Putting your reasons to commute to one side for the moment, if you wanted to annuitise the equiv of the money that you commute, at today’s annuity rates it will cost you (at aged 60) about £41.60 to buy £1 a year of index-linked income with a 50% spouse’s pension – broadly equivalent to the benefits of AFPS. But by age 65, the cost of buying this income has fallen to £35 per £1. By contrast the commutation factor from AFPS 15 is going to be in the range of £12 for every £1 of pension income you sacrifice – at best half an annuity rate.
A more simple cost benefit analysis then kicks in. Can you predict/justify the accrued benefit of commuting (from aged 60 with AFPS 15) that sum and what you manage to achieve with it.. compared to the ongoing benefits that the ongoing income you and/or your partner will receive until you die. One more thing, at what age do you intend dying? Knowing that would help of course.
Your '75 benefits will be treated seperately to those which you wil start to grow iaw '15. The amount that you may commute is expressed as the amount of cash in your notional pot that is surrendered in exchange for each extra £ you wish to take. The higher the Commutation Factor of the scheme (all are different), the less 'pot' you will have to surrender in exchange for cash upfront and that has a big impact, especially later on in retirement.
Each pension scheme sets out ‘cash commutation factors’ that determine the rate at which annual income is converted into a lump sum. Anyone retiring today needs to check these factors to check whether taking a lump sum makes sense - AFPS 15 allows you to transfer up to £12 per £1 per annum (up to HMRC limits).
Taking max commutation isn’t always the best option though. More of late, calculations used to swap an ongoing annual income for a lump sum today haven’t kept pace with changes in financial markets so you may be getting less than the true value of the pension you give up.
Yes, once the money is yours it can’t be taken away and it is tax free and you might need it to pay off a mortgage, yes – they are all credible reasons for maxxing out your the commuted lump sum. But be careful not to underestimate the value of having a guaranteed AFPS income for life that increases with inflation and provides for a partner after your death.
Putting your reasons to commute to one side for the moment, if you wanted to annuitise the equiv of the money that you commute, at today’s annuity rates it will cost you (at aged 60) about £41.60 to buy £1 a year of index-linked income with a 50% spouse’s pension – broadly equivalent to the benefits of AFPS. But by age 65, the cost of buying this income has fallen to £35 per £1. By contrast the commutation factor from AFPS 15 is going to be in the range of £12 for every £1 of pension income you sacrifice – at best half an annuity rate.
A more simple cost benefit analysis then kicks in. Can you predict/justify the accrued benefit of commuting (from aged 60 with AFPS 15) that sum and what you manage to achieve with it.. compared to the ongoing benefits that the ongoing income you and/or your partner will receive until you die. One more thing, at what age do you intend dying? Knowing that would help of course.
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Once a pilot, JTIDS,
Therein lies the rub. It is one thing having a pre defined and pre-determined benefit. It is even one thing to have a pre defined and pre determined benefit that isn't as good as it used to be. But having a pre defined and pre determined, not as good as it used to be and constantly moving benefit is another thing - it certainly isn't the sacred cow it used to be.
If you have 3 massive changes to any defined benefit in 10 years.. then if that doesn't contravene the letter of the law in terms of trade description legislation, it must certainly sail close to the spirit of it. AFPS used to make planning simple. Now though, it can make it harder because although you have been (rightly) encouraged to treat it as the core of your financial future, cynicism takes over - just how much faith do you place in it?
Therein lies the rub. It is one thing having a pre defined and pre-determined benefit. It is even one thing to have a pre defined and pre determined benefit that isn't as good as it used to be. But having a pre defined and pre determined, not as good as it used to be and constantly moving benefit is another thing - it certainly isn't the sacred cow it used to be.
If you have 3 massive changes to any defined benefit in 10 years.. then if that doesn't contravene the letter of the law in terms of trade description legislation, it must certainly sail close to the spirit of it. AFPS used to make planning simple. Now though, it can make it harder because although you have been (rightly) encouraged to treat it as the core of your financial future, cynicism takes over - just how much faith do you place in it?
Thanks Al - for you detailed reply, unfortunately you lost me after the first sentence! Though, in essence I understood most of it.
I understand your sentiment about max communtation and whether given falling pension rates, it would be wiser for me to reduce my lump sum for a better monthly pension. However, I prefer to take what I can now and worry about the future later and as you rightly point out, although I believe I am Peter Pan - I am unsure when I'm going to die!
Having serve 28 years when AFPS15 kicks in, I am content my accrued (AFPS75) rights are protected however, in the new calculator:
I have a lump sum (a) at exit (28 years on 75 / 2 years on 15) and then having opted for maximum communtation - a commutation lump sum (b) - a+b = final lump sum. I then would receive a reduce pension until age 55 when I believe, that would be index linked, only on the AFPS 75 part.
My question, and the bit I am unsure of, is a new line on the calculator - 'Increased AFPS 15 EDP income by commutation' which for me is approx £900. Where does this figure come into things, has it already been factored into communtation lump sum or is it an additional (hoping!) annual payment??
I probably haven't explained myself well and I'm hoping there may be some briefings or examples set out in the coming weeks.
Again, thank you for your help. It is much appreciated.
I understand your sentiment about max communtation and whether given falling pension rates, it would be wiser for me to reduce my lump sum for a better monthly pension. However, I prefer to take what I can now and worry about the future later and as you rightly point out, although I believe I am Peter Pan - I am unsure when I'm going to die!
Having serve 28 years when AFPS15 kicks in, I am content my accrued (AFPS75) rights are protected however, in the new calculator:
I have a lump sum (a) at exit (28 years on 75 / 2 years on 15) and then having opted for maximum communtation - a commutation lump sum (b) - a+b = final lump sum. I then would receive a reduce pension until age 55 when I believe, that would be index linked, only on the AFPS 75 part.
My question, and the bit I am unsure of, is a new line on the calculator - 'Increased AFPS 15 EDP income by commutation' which for me is approx £900. Where does this figure come into things, has it already been factored into communtation lump sum or is it an additional (hoping!) annual payment??
I probably haven't explained myself well and I'm hoping there may be some briefings or examples set out in the coming weeks.
Again, thank you for your help. It is much appreciated.
Cheers Al!
I suppose we will know the sh1t has really hit the fan when, they start reducing the pension that we have already earned. Wait....oh no, they already did with the delayed retirement age and, the 35 qualifying years
!
OAP
I suppose we will know the sh1t has really hit the fan when, they start reducing the pension that we have already earned. Wait....oh no, they already did with the delayed retirement age and, the 35 qualifying years
!OAP
It means giving up your AFPS15 lump sum to increase your EDP. With the new scheme commutation is allowed in both directions.
It's still a pretty poor website/app - some of the potentially variable information, such as anticipated leaving date, is on the first page while some of the fixed data, such as which pension scheme or trade, is on later pages. So if you are looking at the effects of different leaving dates you have to go all the way back to the start. Sometimes selecting an option updates the page, sometimes it's when you click 'next'.
The results are ok as a guide, and ok for comparing the effect of things like leaving date, but the best way is to get a pension forecast from SPVA - mine came back better than the calculator suggested.
The results are ok as a guide, and ok for comparing the effect of things like leaving date, but the best way is to get a pension forecast from SPVA - mine came back better than the calculator suggested.
But does moving the sliding bar change whether you are leaving under PVR terms or not?
If you set your leaving age at 60 and then slide the bar back, I assume it doesn't take into account the reduction in pension caused by leaving early. That could give someone a nasty shock if it doesn't.
Not being able to set a future PAS date means that the tool is effectively useless for pension forecast planning for those due to change over in the next few years.
If you set your leaving age at 60 and then slide the bar back, I assume it doesn't take into account the reduction in pension caused by leaving early. That could give someone a nasty shock if it doesn't.
Not being able to set a future PAS date means that the tool is effectively useless for pension forecast planning for those due to change over in the next few years.