NEM Alignment

[Just This Once...]

Originally Posted by Lordflasheart

My limited, amateur understanding is that the current lifetime allowance (£1.25m ?) applies to one's entire range of pension provision - which might include multiple workplace pensions, private pension plans and AVCs, (but not OAP at present.) Furthermore the LTA will take into account the growth of all those funds where 'growth' applies. The exception is for Final Salary schemes where the LTA is 'back-calculated' by multiplying your expected FS pension by 20. That is to say, if one's expected FS pension is 50k (yeah I know ...) it is multiplied by 20 to give you a deemed LTA of £1m.

The 'other lot' are talking about a reduction to £1m LTA from after the May election – to fund something or other ... as well as a reduction of tax allowance on one's pension contributions. If you exceed the LTA there are whopping penalties.

Serving to 60 on a mixed AFPS05/15 would see a flt lt PAS earn a £50k+ pension plus gratuity. If my understanding and humble maths is correct a reduction to £1M LTA would snare all officer aircrew serving to age 60. Even if the LTA remained at £1.25M it would not take that many years for inflation to see the vast majority of aircrew retiring at 60 to be hit by the LTA.

[Al R]

However the maths does or doesn't pan out, and whatever the merits (or otherwise), you can opt out of AFPS membership don't forget.

[Melchett01]

But if you do opt out, am I right in thinking that would effectively be a double pay cut?

MOD would be unlikely to agree to alternative arrangements in lieu of your pension contributions as you might be able to negotiate in a civilian job? Therefore you'd suffer an immediate cut equivalent to the amount your salary is abated by to take into account the 'non-contributory' nature of the pension, and then a longer term cut as you would effectively lose out on the compounded growth of that 6% (?) per annum.

Or could you reclaim your abated salary and park it in an ISA or other investment vehicle?

[Al R]

You'd get nothing back, and you'd get nothing extra because the scheme membership is (notionally anyway) non contributionary. But as we know, salary is abated to reflect the accrual of benefits. I don't think there's a right or a wrong answer as everyone's needs are different, but it might be the lesser of two evils.

Interesting and potentially worrying too, for anyone reaching 55 shortly after the April/AFPS15 transition handover - if that person isn't transiting onto '15, it looks like they will be pension orphans. So given that it's AFPS scheme membership which offers the death in service benefits, is there going to be an issue there too I wonder?

It certainly presents a dilemma, and one that cropped up after chatting to someone recently and when reviewing a file; maybe voxpop could offer some clarity on how the scheme is going to handle this? Or is there something blindingly obvious that I've missed in how NEM is going to work for those extending from 55 to 60 and therefore, more likely to breach their LTA?

[just another jocky]

Al, how can we calculate how close we are to out LTA and how long it would take to breach it?

[Al R]

The LTA calc is simple. 20 times your annual pension and add the tax free cash (if AFPS is all you have). How soon will you reach it? It's a moving target that'll depend on what your final pension is when you leave.

[just another jocky]

Thanks Al.

That puts me very close if I sign on to 60 and continue with AFPS05.

[downsizer]

......................

[Selatar]

And of course whatever pay rises occur in the interim will play their part in closing the gap I presume?

[Just This Once...]

Yep, as I understand it so wage inflation will bring many more towards the LTA. Usually a threshold such as this would be indexed upwards but the political pressure appears to reduce the LTA over time, rather than increasing it.

[Fintastic]

NEM - too many unknowns....

So, I will be in similar position to the example at the top of the page posted by 'just this once...', yet the online LTA calculator running alongside the forces pension calculator indicates I'll be well clear of the threshold....hmmm.

With this being such a complex matter, I doubt there are many FAs that will be up on the detail in the timescale provided. Although at present I plan to take the offer, I only got my paperwork today and will be applying for an extension to enable me to seek appropriate financial advice and suggest others do the same. There are far too many repercussions and unknowns about the whole NEM to make such decisions in haste.

Additionally, if they have now extended the PAS by 5 years, then shouldn't they also extend the pay scale by the same amount.....just sayin'

[Lima Juliet]

There is a nice little guide on LTAs here: https://www.gov.uk/government/upload...n_Benefits.pdf

Unless you are in the rarified atmosphere of Gp Capt and above then the extra 5 years should be OK for most by my 'fag packet' calcs. Top rate of PAS might need some careful calculation too.

LJ

[Al R]

The LTA issue applies to more mere mortals too, and to all pension savings don't forget. But the essence of what you're saying is right. Taking it further raises the following issues.

If you're leaving as a more youthful Sqn Leader or Wing Commander and embarking on 20 or so more years in the 'real world', it's still something to be aware of. Currently, typically, a Sqn Leader might have used up 60% or so of his/her LTA - if you then factor in, the 'pure' addition of a few hundred thousand via an airline pension scheme until aged 60, you're there or thereabouts.

If the g'ment then further reduces the LTA to £1,000,000 in the next Parliament (I don't think it will, it'll be more likely to harmonise rate tax at a flat 30-35%), then retired Sqn Leaders and certainly, Wing Commanders on a normal pay branch, will need to look at the pros and cons of fixed and transitional protection.

If I were a senior officer interviewing for a new position and negotiating terms, it's certainly a contingency I'd be discussing. Namely, 'actions on' in the event of an LTA breach or imminent breach.

[Just This Once...]

My offer arrived in my inbox this morning with a deadline of 20 Mar. The email links to a few IBNs dated the end of Jan with a host of ToS changes too. I had not seen these and they appear to change the PAS ToS and PVR rights.

They don't make it easy do they.

[just another jocky]

JTO - deferred decisions are available I've been told so don't feel too pressured. My e-mail arrived 27 Feb and they gave me until 27 Mar to sign in or out.

I read those IBNs but couldn't find any significant changes to ToS for me. I can still PVR with 6 months notice. No further increments is an issue though.

Thing is, if they would but realise the number of us that would sign an FTRS contract for an ADC post (not bag carrier but a job share) they wouldn't be worried with offering us extra service. I'd sign up for ADC tomorrow!

[Backwards PLT]

I have also just received this today, although the letter states that I have 28 days from receiving the letter to reply.


I'm not sure I see many downsides - the 6 month notice to leave changes from age 50 to 30 years service (so 51 if you joined at 21) but that's about it. I realise that the pension issue for those that were within 10 years of 55 on 1 Apr 12 (I think it was 12?) will have a significant impact on some, but not for me.


If anyone hasn't run the scenarios through the pension calculator, do it now! As a mid 40s PAS Sqn Ldr on AFPS75 (soon to be 15), I can leave on my 55th birthday in 10 years or so, and get about 100k lump sum plus just over 29k /yr. If I do 5 more years I get a 69k lump sum and just over 46k /yr. 17k /yr extra for a loss of 31k lump sum is a big boost even taking into account that the lump sum is tax free and the income will be taxed at 20/40%.


I see that (20x46k)+69k is 989k so below the magic 1 million mark!


If anyone has seen any other downsides that I have missed I would appreciate it if you posted before I sign the form!


EDIT: Agree about the increments, though. They need to add 5 more, perhaps only accessible if you sign on to 60, but I don't see it happening.

[Just This Once...]

The 6 month PVR right seems to be in my favour as I joined at 18; so I guess I can bail at age 48 on LOS30 if the pain vs reward becomes too great.

[PostMeHappy]

PVR..

Gents,

Heads up that the 6 month PVR now only applies to RoS 30 yrs+, and has been removed for age 50+ in toto, irrespective of any NEM acceptance.

[Could be the last?]

I thought the RoS 30 only applied if you signed up to the T&Cs associated with NEM/MEOS?? Therefore, if you didn't sign then you could leave at 50 on the original terms.....?

Does anyone know if Manning have offered PAS this year, or are they hanging back to see what the uptake rate of the allignment is before boarding applications?

[just another jocky]

Originally Posted by BackwardsPLT

I realise that the pension issue for those that were within 10 years of 55 on 1 Apr 12 (I think it was 12?) will have a significant impact on some,

What exactly do you mean by that? I wasn't aware of a pension issue and I was within 10 years of 55 on 1 Apr 12.