Pension abatement - is it legal?
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I am posting this is on behalf of the General Secretary of the Forces Pension Society:
The Forces Pension Society does not often intervene in pensions discussions here, but we are the people who know what we are talking about on pensions issues and sometimes we regard it as our duty, where readers may have been misled, to set the record straight.
The long post from Mr Rush about pension arrangements is misleading in a number of ways. Most important it gives the impression that it is only the Armed Forces pension schemes AFPS75 and AFPS05 that applies an abatement ruling to its pensions in payment where the recipient rejoins the Armed Forces in either a Regular or Reserve mode – it is not. Those same basic rules apply to all public sector pensions in place prior to 1st April 2015. For example at the following website link of http://www.civilservicepensionscheme... it states quite clearly that:
If you have:
•a Civil Service pension, or have
•taken an annual compensation payment (ACP)
and subsequently take a job with an organization that is cover by the CSP arrangements, you may not earn more, by way of ‘re-employed’ salary and pension, than you were earning before you retired. Where your new salary and pension exceeds your previous salary, we deduct the excess from your pension. This is known as ‘abatement’.
We may also abate your:
• pension if you opt for partial retirement, or
• Salary (rather then pension) if you had a Compulsory Early Severance package that included a reserved rights top-up payment and subsequently take a job with an organization that is covered by the CSP arrangements. This is because the top-up payment includes and element of pension.
And it's the same across all schemes.
As to the Pensions’ Ombudsman’s decision that Mr Rush refers to, it is a pity he did not also quote the following Ombudsman’s adjudications made this year in respect of the abatement of pensions:
a. PO – 6549 given in May 2016 in which he refused to uphold a complaint that a Fireman’s pension should not be abated.
b. PO – 8171 of June 2016 and PO 12738 of July 2016 in which he refused to uphold complaints that overpaid pensions should not be refunded because an abatement calculation was not correctly conducted when the two individuals returned to teaching after having left and had their pensions put into payment.
In other words these points have been tested and the tests have not shifted the terms of the original policy. What good was the Teacher’s Union or Fire Brigades Union in these cases? It is quite wrong to suggest that if only we tried harder and had more experts on our side we'd knock these skittles down - retrospective changes to established schemes rarely if ever happen. But we do intervene where it makes sense to do so.
For example there was the decision given on 19th June 2014 where the Pensions Ombudsman ruled in favour of a Mr Alberry when he complained that the DBS Veterans UK were failing to correctly apply the abatement rules in cases where a Pension Sharing Order was issued during a period of further service where a pension had been abated. Mr Alberry is a member of our Society and we assisted him throughout his appeals process to a successful conclusion. I would not classify that as the work of an amateur organisation.
Mr Rush is completely wrong to state that the AFPS05 pension scheme does not offer a pension – of course it does. If an individual leaves the Armed Forces at age 55 or over with AFPS05 benefits, they are payable immediately on exit. If the individual leaves before age 55 but aged 40 or over with at least 18 years’ service under their belt, then they have entitlement to an Early Departure Payment (EDP) lump sum and income stream based on the actual pension earned; such pensions being deferred but payable at age 65. I am not sure from where Rush gets the idea that one of the purposes of the EDP income stream is to buy a home; the primary purpose of the EDP scheme is to encourage serving individuals to serve to age 40 and leave with a decent compensation package because the employer has no further employment for you at that point, which is exactly the same primary purpose of the old AFPS75 pension scheme – encourage serving personnel to carry on to complete a minimum of number of years’ service.
This is all important and serious stuff and we are the organisation that knows its way round the issues. Should anyone need help with this just join us and you will get the best help there is.
The Forces Pension Society does not often intervene in pensions discussions here, but we are the people who know what we are talking about on pensions issues and sometimes we regard it as our duty, where readers may have been misled, to set the record straight.
The long post from Mr Rush about pension arrangements is misleading in a number of ways. Most important it gives the impression that it is only the Armed Forces pension schemes AFPS75 and AFPS05 that applies an abatement ruling to its pensions in payment where the recipient rejoins the Armed Forces in either a Regular or Reserve mode – it is not. Those same basic rules apply to all public sector pensions in place prior to 1st April 2015. For example at the following website link of http://www.civilservicepensionscheme... it states quite clearly that:
If you have:
•a Civil Service pension, or have
•taken an annual compensation payment (ACP)
and subsequently take a job with an organization that is cover by the CSP arrangements, you may not earn more, by way of ‘re-employed’ salary and pension, than you were earning before you retired. Where your new salary and pension exceeds your previous salary, we deduct the excess from your pension. This is known as ‘abatement’.
We may also abate your:
• pension if you opt for partial retirement, or
• Salary (rather then pension) if you had a Compulsory Early Severance package that included a reserved rights top-up payment and subsequently take a job with an organization that is covered by the CSP arrangements. This is because the top-up payment includes and element of pension.
And it's the same across all schemes.
As to the Pensions’ Ombudsman’s decision that Mr Rush refers to, it is a pity he did not also quote the following Ombudsman’s adjudications made this year in respect of the abatement of pensions:
a. PO – 6549 given in May 2016 in which he refused to uphold a complaint that a Fireman’s pension should not be abated.
b. PO – 8171 of June 2016 and PO 12738 of July 2016 in which he refused to uphold complaints that overpaid pensions should not be refunded because an abatement calculation was not correctly conducted when the two individuals returned to teaching after having left and had their pensions put into payment.
In other words these points have been tested and the tests have not shifted the terms of the original policy. What good was the Teacher’s Union or Fire Brigades Union in these cases? It is quite wrong to suggest that if only we tried harder and had more experts on our side we'd knock these skittles down - retrospective changes to established schemes rarely if ever happen. But we do intervene where it makes sense to do so.
For example there was the decision given on 19th June 2014 where the Pensions Ombudsman ruled in favour of a Mr Alberry when he complained that the DBS Veterans UK were failing to correctly apply the abatement rules in cases where a Pension Sharing Order was issued during a period of further service where a pension had been abated. Mr Alberry is a member of our Society and we assisted him throughout his appeals process to a successful conclusion. I would not classify that as the work of an amateur organisation.
Mr Rush is completely wrong to state that the AFPS05 pension scheme does not offer a pension – of course it does. If an individual leaves the Armed Forces at age 55 or over with AFPS05 benefits, they are payable immediately on exit. If the individual leaves before age 55 but aged 40 or over with at least 18 years’ service under their belt, then they have entitlement to an Early Departure Payment (EDP) lump sum and income stream based on the actual pension earned; such pensions being deferred but payable at age 65. I am not sure from where Rush gets the idea that one of the purposes of the EDP income stream is to buy a home; the primary purpose of the EDP scheme is to encourage serving individuals to serve to age 40 and leave with a decent compensation package because the employer has no further employment for you at that point, which is exactly the same primary purpose of the old AFPS75 pension scheme – encourage serving personnel to carry on to complete a minimum of number of years’ service.
This is all important and serious stuff and we are the organisation that knows its way round the issues. Should anyone need help with this just join us and you will get the best help there is.
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Hello John,
I did not remotely give the impression that it is only AFPS which grants abatement - in fact, I suggested that I wasn't aware it occurred "in industry", thereby implying there was a difference between public and private. Of course it isn't confined to AFPS. But that's what we were talking about.
I answered not with specific circumstances in mind, I did not offer anything other than to offer a thought how abatement might play out in the future. I referred to John Cridland who will steer state income thinking. Coincidentally, he spoke yesterday at an Eversheds event and remarked that pension spending was set to increase from 6.1% in the mid 2020s to 7.6% in just two decades, and that savings must be made. He further noted that we have consistently got our expectations of life expectancy wrong and that we need to address the generosity of our various schemes. He asked if there had to be trade offs, more pertinently, he asked whether a single state function has utility today when job structures and market now have so much variety and flexibility. In those circumstances, I stand by my thinking.
You seem to agree with me in respect of my point about AFPS05 and a pension. Although I referred to two or three of its aims, you seem to try to debunk me by referring only to its 'primary' aim - which I never mentioned. We all know there is a 'pension trap', but I referred to two or three of the reasons why we had a military income stream, and one of the reasons is, to be able to buy a home on demob. Maybe you speak with more retiring clients than I do, but I certainly used my AFPS75 income to pay for my home (maybe I'm in a minority of one). I also specifically referred to it as an EDP income stream, and until NRA is reached, that's what it is (and that's what HMRC classifies it as).
Have I ever classified the work of FPS as amateurish? I may have done, the various committees that FPS sits on, but that is a tangible difference. I may too, have referred to some of the participants as amateurs, but that is what they are. And it's not being demeaning, it's a fact. And I wasn't alone either, in thinking that CAC was sub standard and unsuitable for its task. So did Mary Burt in one of the releases afforded to us under legislation when it looked at the lack of scrutiny given by the committee (upon which FPS sits) to c.2010 dramatic pension changes that no one was told about. Why did FPS allow it to proceed/slip through?
Your final point touches upon the problem. One has to pay to join a society to get basic information. This is wrong. There should be a fully functioning Federation doing the job. It is no secret that I think the society has wavered in its priorities these past eighteen months or so, and that, prior, it very badly let down some retirees. I'm going to explore many things next week, relating to that particular issue, and I have secured the services of the actuarial team at one of the UK's largest life companies which is keen to help. It is no secret either, that I think the new system offering oversight of pension scheme changes is grossly inadequate and verges on the criminally irresponsible.
Finally, it's been over twenty seven years since anyone referred to me as 'Rush'. Forgive what might come across as amused pique, but given that I also contribute towards your handsome salary, might I suggest that a little courtesy may be in order.
Edit, not thirty two years.. twenty seven.
I did not remotely give the impression that it is only AFPS which grants abatement - in fact, I suggested that I wasn't aware it occurred "in industry", thereby implying there was a difference between public and private. Of course it isn't confined to AFPS. But that's what we were talking about.
I answered not with specific circumstances in mind, I did not offer anything other than to offer a thought how abatement might play out in the future. I referred to John Cridland who will steer state income thinking. Coincidentally, he spoke yesterday at an Eversheds event and remarked that pension spending was set to increase from 6.1% in the mid 2020s to 7.6% in just two decades, and that savings must be made. He further noted that we have consistently got our expectations of life expectancy wrong and that we need to address the generosity of our various schemes. He asked if there had to be trade offs, more pertinently, he asked whether a single state function has utility today when job structures and market now have so much variety and flexibility. In those circumstances, I stand by my thinking.
You seem to agree with me in respect of my point about AFPS05 and a pension. Although I referred to two or three of its aims, you seem to try to debunk me by referring only to its 'primary' aim - which I never mentioned. We all know there is a 'pension trap', but I referred to two or three of the reasons why we had a military income stream, and one of the reasons is, to be able to buy a home on demob. Maybe you speak with more retiring clients than I do, but I certainly used my AFPS75 income to pay for my home (maybe I'm in a minority of one). I also specifically referred to it as an EDP income stream, and until NRA is reached, that's what it is (and that's what HMRC classifies it as).
Have I ever classified the work of FPS as amateurish? I may have done, the various committees that FPS sits on, but that is a tangible difference. I may too, have referred to some of the participants as amateurs, but that is what they are. And it's not being demeaning, it's a fact. And I wasn't alone either, in thinking that CAC was sub standard and unsuitable for its task. So did Mary Burt in one of the releases afforded to us under legislation when it looked at the lack of scrutiny given by the committee (upon which FPS sits) to c.2010 dramatic pension changes that no one was told about. Why did FPS allow it to proceed/slip through?
Your final point touches upon the problem. One has to pay to join a society to get basic information. This is wrong. There should be a fully functioning Federation doing the job. It is no secret that I think the society has wavered in its priorities these past eighteen months or so, and that, prior, it very badly let down some retirees. I'm going to explore many things next week, relating to that particular issue, and I have secured the services of the actuarial team at one of the UK's largest life companies which is keen to help. It is no secret either, that I think the new system offering oversight of pension scheme changes is grossly inadequate and verges on the criminally irresponsible.
Finally, it's been over twenty seven years since anyone referred to me as 'Rush'. Forgive what might come across as amused pique, but given that I also contribute towards your handsome salary, might I suggest that a little courtesy may be in order.
Edit, not thirty two years.. twenty seven.
Last edited by Al R; 2nd Dec 2016 at 17:24.
Going back a bit - 20 years !! - our big whinge was that specialist aircrew flying pay (about a third of our total income) did not count towards our pension although NI contributions were paid on it? - Mahogany Bob (Mr)
One could always go back 40 years to when I believe AVCs (now Added Pension vide https://www.raf.mod.uk/community/new...contributions/) were introduced and could have ben used to good effect.
Jack
One could always go back 40 years to when I believe AVCs (now Added Pension vide https://www.raf.mod.uk/community/new...contributions/) were introduced and could have ben used to good effect.
Jack
Well said Al
I have never been a fan of the FPS since some poor advice I got. Here is one of the threads explaining my issue and also that of others:
http://www.pprune.org/military-aviat...tion-55-a.html
I'm sure they must be doing good for some people, but for someone who was not afraid of getting their head into the rules and regs then they didn't really offer anything of value to me.
By the way I agree an EDP is most definately NOT a pension - it's a payment. Big difference!
Best
LJ
I have never been a fan of the FPS since some poor advice I got. Here is one of the threads explaining my issue and also that of others:
http://www.pprune.org/military-aviat...tion-55-a.html
I'm sure they must be doing good for some people, but for someone who was not afraid of getting their head into the rules and regs then they didn't really offer anything of value to me.
By the way I agree an EDP is most definately NOT a pension - it's a payment. Big difference!
Best
LJ
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Just out of interest, what are the pension arrangements of our starred officers?
Whenever I see arrangements for us mere mortals, their arrangements, like those of the SCS are 'dealt with separately'.
Whenever I see arrangements for us mere mortals, their arrangements, like those of the SCS are 'dealt with separately'.
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If you have:
•a Civil Service pension, or have
•taken an annual compensation payment (ACP)
and subsequently take a job with an organization that is cover by the CSP arrangements, you may not earn more, by way of ‘re-employed’ salary and pension, than you were earning before you retired. Where your new salary and pension exceeds your previous salary, we deduct the excess from your pension. This is known as ‘abatement’.
•a Civil Service pension, or have
•taken an annual compensation payment (ACP)
and subsequently take a job with an organization that is cover by the CSP arrangements, you may not earn more, by way of ‘re-employed’ salary and pension, than you were earning before you retired. Where your new salary and pension exceeds your previous salary, we deduct the excess from your pension. This is known as ‘abatement’.
