Not Long..... As I work it, you have to first get your UK pension paid here then if that falls short of the Kiwi pension the govt here make it up to what you would get if you only had the UK pension. Its complicated and if you have worked elsewhere and have paid toward their pesion you have to get that paid as well, a friend worked in Canada for a couple of years and they have to get that paid first before she gets her Kiwi pension to top up the amount. If there is a way to get the money back from the UK govt and pay it to the NZ govt I would be interested to hear.

fergineer - google the Special Banking Option at Work and Income

OMG....:eek: You've got a 12 year+ golden handshake as well. Spend it all quick and declare bankruptcy.

Still don't understand the workings of this but are you better off as a result of getting the state pension or does the reduction to your service pension equal the amount you get from the state?

This seems to be official MOD statement on this issue:

Guaranteed Minimum Pension (GMP) - Error In Calculation

Full details here.

endplay,

On the surface of it, yes - you get the State pension in addition to AFPS. But your State pension is deemed to have been taxable income, and it certainly goes towards the annual allowance that you are able to 'earn' each year without paying tax.

The difference is that (currently) your annual allowance at 55 is £7474, at 65 it is £9940 and at 75, it is £10090. The net result is that the older you get, the more you can receive without paying tax. Don't forget, if its best for you, you can defer taking your State pension and get a higher amount.

There are lots of pros and cons in doing that; for some people, it isn't the correct thing to do. Finally, it isn't what you earn.. it isn't even about how much you make, its what you keep.

Pensions et al
 

Whilst your personal tax allowance increases at age 65, if your net annual income exceeds £24000 you lose £1 of tax allowance for every £2 of income until your Tax allowance reduces to the standard £7470. My RAF pension + state pension + income from part time work mean that my tax allowance will remain at the basic £7470!! So much for working for a pension and paying tax and NI for 50 years! If you have a net income of more than £100K - lucky you, the £1 for every 2 rule applies until your tax allowance reaches ZERO!! The £100K rule applies regardless of age.

I am due to receive my state pension next month and enquired of Paymaster what effect this would have on my 2 RAF pensions (I did a stint of FTRS after the age of 55) because of the Minimum state pension rules. To my surprise they had already done the calculations and the result will be a gross reduction of approx £110 pa. For comparison purposes I joined in 1966 and was just short of my 55 point when I transferred to FTRS for a further 5 years service leaving in 2005.

Hope these current facts help someone along the way

Old dog,

Always take proper advice, but you are absolutely (regretably) right. Hence the need to consider at least, a personal pension for the wife/husband/girlfriend/boyfriend/cat/dog. Anything to use up their personal annual tax allowance and not just yours. Its all very well, an alpha male banging flying pay like mad into an AVC (for instance) if he then gets taxed to hell and back on the subsequent larger income in retirement - especially when his wife has not had any pension/savings/investments in her name for the past 30 years or so.

Offshore Bonds too; although investment vehicles and subject to risk offer income which is not classified as income, rather, return of capital (up to 5% of Bond value pa is allowable, free of tax). They used to be the preserve of the very rich - now though, more an invaluable weapon in the relentless fight against George Osborne and the ginger rodent. Offshore Bonds; also potentially very useful for planning for a child's education, as you can allocate a nominee (the young adult in education) segments of the Bond each year, which they can then receive without a tax liability (limits apply) and which can go towards an education/food/housing/weed/beer/pizza etc.

An excellent demonstration of why a balanced portfolio is vital, and not necessarily balanced just across sectors but also across instruments. It's why I am sticking with the AFPS pension and putting what I can into stocks and shares ISAs. Assuming the current rules remain extant going forward, I will hopefully have a pension and source of tax free returns / income which will mitigate some of the rules which give with one hand and take away with the other.

One could also do as I did and marry a Lady whose income (and therefore Pension) is greater than your own!!

Best day of the year to retire?
 

Peeps,
If one could choose the day of the year to retire, and thus maximise future income, is any one day better than another to retire on?
Is it better to leave on 31 Mar, 1 Apr or , say 5 Apr, to tie in with the financial year, or is it better to go on CPI/RPI day?
Any help would be appreciated. As usual I will sift the banter from the fact as I too know that a day out of uniform is a day wasted and, yesterday was always the best day to retire!
CNN
:ok:

There are a lot of factors to consider and most depend on your personal circumstances. However, here are a couple of important ones:

With a pay freeze in force, your pension will only increase by your yearly pay increment - if you have any left; if not, your pension is frozen as well.
The last time I looked, the yearly increment was about 3% of basic salary (although it varies a bit). As inflation is running at about 4.5%, your pension will be losing value in real terms if you stay in. Anyone who reached their maximum pension scale 18 months ago and remained serving will have suffered nearly a 10% decrease in the real value of their pension by Apr 2013!

However, your pension becomes index-linked from the day you leave the Service. The next pension increase will be applied in Apr next year and will be based on the CPI rate announced next month. If you were to leave the Service today (with 6 months of the FY yet to run) then you would receive a pension increase of half of the CPI figure.

So on the face of it, if you've decide to leave soon, it would be best to get your hands on your pension as soon as you can. However, you might wait for a big pay rise in Apr 2013 (hence a big increase in pension), or you might gamble that inflation will fall below your yearly pay increment of about 3% soon and make it worthwhile staying in. But don't hold your breath..........

LFFC,


"...With a pay freeze in force, your pension will only increase by your yearly pay increment - if you have any left; if not, your pension is frozen as well...."



That is so wrong that it shows you have a total misunderstanding of how the pension scheme works!!!!


Edited to add an example:

I have no yearly pay increments left, so am on a total pay freeze, yet in the next 12 months the value of my pension will rise by 3.2%! Yes, I'm still loosing out compared to inflation, but by nowhere near the amount you are suggesting.



My advice to anyone considering leaving is to take professional advice on the financial consequences, don't believe what you read on here, get from a man in the pub, etc, etc......

I thought the same, my pay is frozen but I have had 1 with 1 more to come PA increment. If I have misunderstood things I would be grateful for some more info please :confused:

I should perhaps have said, "your yearly pension increment - if you have any left" - sorry if I confused you. Those serving on AFPS 05 will get an annual increment of 1/70th of their salary up to 35 years of service (on PAS, the maximum levels are dependant on your rank/trade). Those serving on AFPS 75 get an annual increment as published in the Pension Code tables up until 34 years of pensionable years of service.

Unless something has changed in the last couple of months, please explain what I've got wrong Biggus.

I agree about getting independant advice, as I said, it all depends on your personal circumstances.

That all said, the Telegraph seems to be running a campaign to take even those pension increases away from you!

When is a pay freeze not a pay freeze?

Right then.....

I'm on the PA payscale, and have gone as high as I can. Therefore no more annual increments, and I'm on a pay freeze. However,.....

I have currently served 31 years (ish). So my pension is 31/70ths of my "final salary". A year from now my pension will be 32/70ths of my "final salary". Yes, the final salary in question won't have changed, but the proportion of that final salary that makes up my pension will have gone up - hence my pension has increased in value.

Now, going from 31 years qualifying to 32 means an increase of 32/31 (if it is easier for you to understand compare 32/70ths to 31/70ths as a ratio), which is 1.0322, or 3.2%. The year following that, when I go from 32 to 33 years, it will only be an increase of 3.1%. However, if I was younger, and say going from 25 to 26 qualifying years, that would be a 4% rise.

Hopefully I have explained that sufficiently well that it makes sense...

I did say "the yearly increment was about 3%" and that things would depend on your own personal circumstances. Sorry for not being accurate enough for you, but yes, you've got the idea.

My turn to apologise if I got the wrong end of the stick....

The point is, the only people who be seeing the value of their pensions decrease by 10% ish are those that have served 35 years on AFPS05 or 34 years on AFPS 75.

These will be a fairly small and select band, aged 52+ depending on how old they were when they joined up (for example, having joined older than 20 it won't effect me even when I get to 55 and retire).

Loss of pension buying power vs inflation is just one factor this select band will have to consider when deciding on what to do in future, along with job satisfaction, current earnings vs possible salary outside, etc.

However, as I said before it should be a very small group, and won't effect the majority of pprune readers.

Yes, that's correct.

However, although it's not the original point of this thread, everyone serving should realise that a 2-year pay freeze, whilst inflation is running at 5%, means that the real value of their pay (and resulting pension) will have been reduced 10% by next April.

Last post, then I'll let it lie.....


Say my pay was £70,000 in Apr 2010. With a pay freeze in place, it will still be £70,000 in Apr 2012. With inflation running at 5%, after the two years £70,000 will buy less, and the "real value" will have decreased by about 10%.

If in Apr 2010 I have served 30 years, my pension would be 30/70ths of my salary, £30,000. In Apr 2012 my pension would be 32/70ths of my salary, £32,000. Hence my pension has gone from £30,000 to £32,000, a 6.6% rise. With inflation running at 10% over those 2 years, the "real value" of my pension has decreased by approx. 3.3%. If I was younger it would have decreased by even less.

A pay freeze means that EVERYONE in the military will see their salary effectively decrease by the value of inflation. By contrast their pension will effectively decrease by an amount that will vary from the total value of inflation, for a small group of older people at the top end of the pension schemes, to virtually nothing for younger individuals who have recently qualified for an immediate pension. However, the value of the pension certainly isn't going up!


Just think what the "value" of pensions would be going up by if there was no pay freeze and inflation was lower! Which is exactly what was happening for the years prior to Apr 10.


At the end of the day the military pension scheme is a bl*#dy good deal!

Do any mathematical computation you like but for simple old me the Pension Calculator has not moved in any significant manner since the pay freeze hence my perception that I have actually lost a tidy sum of money as opposed to gained anything.

But have to agree the PA pension is a fabulous sight to behold :ok:

I'm not on commission, honest.

And he hasn't actually done anything for me yet.

But, if you have any flex in your finances to enable you to make decisions (and nearly everyone on here does, I suspect), a chat with Al R will be enlightening and profitable.

Sven

Sven, (cheque's in the post chum, although in respect of profit, the value these days of investments can even occasionally go up as well as down!) - hope you are well and things are evolving nicely for you. I’m still waiting for Greece to default once and for all so I can pick up a beach pad in Protaras for peanuts when certain Cypriot banks implode. You on LinkedIn? In fact, is there anyone on it who would like to exchange details?

Back on topic, if you’ve been commissioned from the ranks, your net accrual and personal pension statement relate to you, not the bloke next to you in the crewroom who might not have been. Reckonable service for AFPS does not begin until 21 for officers and 18 for ORs, regardless of when you join up. So, accrual of a full service pension at age 55 takes 34 years for officers and 37 years for ORs.

Accrual is uneven over a career with higher accrual at the outset, up to IPP. Pension and terminal grant accrue separately - if they accrued together producing a higher base level of pension, (with no terminal grant payable unless the member commutes part of his pension), widow/civil partners’ pensions might rise as they are normally set at half the scheme member’s pension entitlement. There is room, under HMRC limits, for a general increase in AFPS benefits.

Pensions benefits for the scheme member account for 62.5% of pay and half that figure for the widow etc. The Inland Revenue limit is up to 2/3 pay for the scheme member, and up to 4/9 pay for the surviving widow/civil partner/dependent. There would, therefore, be flex within the usual rules governing pensions schemes to increase the level of benefits, although the benefits and affordability of an increase of this sort would be pretty well impossible in today’s economic climate.

In respect of PA spine etc, the fact that flying pay is not pensionable is a bugbear because it is seen as a consistent part of overall remuneration and consequently, a ‘career’ flier’s pension on retirement may be a much lower proportion of final earnings than that of someone within PA spine. However, all Specialist Pay is currently set at a level which take account of its non-pensionable status anyway.

Go here for a more accurate (mostly!) prediction www.mod-abc.co.uk , but as a quick fag packet calculation (05);

If you were in for 25 years and your final salary was £40,000 your annual pension would be:

£40,000 × 25 × 1/70 = £14,278

If you were in for 10 years and your final salary was £25,000 your annual pension would be:

£25,000 × 10 × 1/70 = £3,571

edit: I saw a client last night who may well be reading this, and I was told of a flightdeck rumour that promotion from here on in would be dependent on transferring from 75 to 05. Any truth in that rumour?!

Here's another bombshell for those that retired in the past couple of years and took resettlement commutation. From what I read there may have been over payments and underpayments...:eek:

http://www.mod.uk/NR/rdonlyres/7334A...IONFACTORS.pdf

LJ

'I saw a client last night who may well be reading this, and I was told of a flightdeck rumour that promotion from here on in would be dependent on transferring from 75 to 05. Any truth in that rumour?!'by Al R

Definitely true that this is a Purple rumour doing the rounds.

If true, there will be more people diving for the doors...which might be the ultimate aim anyway.

:ok:G

As there appear to be some people here who know what they are talking about, I hope the OP won't mind me stealing the thread to ask a couple of questions on pensions. Clearly I won't base my entire future life on the answers, will consult a professional etc, etc.....

According to the on-line pensions calculator, if I leave at 55 as a Sqn Ldr (probable worst case) I will get a lump sum and about £26k pa. So:

1. Will I get the state pension (about £5k pa) in addition to this (presumably at state retirement age)?

2. Will my wife get the state pension as well, assuming she has 30 years of NI contributions?

3. If she has, say, 22 years of NI contributions will she get 22/30 of the state pension?

4. Does this change if I live overseas (in the EU)?

5. If I top this up with an annuity, or some other investment, will I pay UK tax on that or overseas?

6. Will the service pensions people answer these types of questions?

Obviously I know things might change soon with service pensions.

Thanks.

Backwards,

Currently, every serviceman will get the Basic State Pension (BSP) in addition to AFPS, assuming he/she has contributed sufficient (currently, 30 years) National Insurance Contributions (NIC).

Qualifying for a basic State Pension : Directgov - Pensions and retirement planning

Yes, your wife will also get an independent BSP if she has contributed enough, or spent years away from work raising a family. If she does not have sufficient years in the bank to get a full pension, she will get a pro rata one and/or she can make additional payments, although conditions do apply. Adding years doesn't just help with BSP, the payment of voluntary NICs also helps towards:

• Widowed parent's allowance
• Bereavement payment
• Bereavement allowance

No, it won't change if you live overseas within the EU.

It depends where you live. We have dual taxation agreements with most countries now. If you intend to live overseas, if that idea is etched in stone, you might consider products such as an offshore bond, which (currently), if started overseas and then bought back 20 years later, would allow return of capital and growth free of tax. In principle, you might not want to consider annuities right now. The rates are pants, they are inflexible and there are many far, far better options out there these days.

There are lots of options though - don't take any of that as advice, see someone suitably qualified who you are happy with and evolve a plan.

Al R

Thanks very much for the reply - I will definitely get further advice, but your info provides a good base from which to start.

Cheers

I GOT AN INCREASE!!!
 

Well how about that? My note from SPVA came today and my commuted lump sum is £3000 bigger than predicted (both by letter and the on-line calculator), my annual Resettlement Commutation amount was smaller by £400 and my annual pension bigger by £300 per year.

The letter arrived exactly 7 days after retirement and the money will be in my account 17 days after leaving.

Spot on! :D:D:D:D:D:D

If only the rest of my experience in the RAF was like that I might have stayed a bit longer!

LJ

Just to stay on a high note - there's always hope (however faint)!

Public sector pension challenge reaches High Court

Mudge
 

I have just found out that my service pension will be reduced under the:
National Insurance Modification Rule (MOD).

When you asked questions about this did you get satisfactory answers
or did you get the feeling that Xafinity staff were putting up a smoke screen?

I would like to establish a network communication on this and together we may be able to reveal just exactly what this is all about. Looking forward to sharing information with you.

Mudge

Mudge,

In fairness to them, they administrate pension payments and aren't pensions experts. When you joined up, by default, you became a member of AFPS and as a consequence, were contracted out of SERPS or the State Additional Pension scheme. That was the law at the time (it goes back to when National Insurance was first introduced) and it meant that you couldn’t get the additional pension benefits because you were contracted (or ‘opted’ out of it). As a result, you and the RAF paid lower National Insurance contributions and in return, AFPS trustees agreed that you would receive a military pension no less than the Guaranteed Minimum Pension (GMP) from State Pension Age. GMP was more or less equivalent to the State Additional Pension given up, and the State Additional Pension paid by the State had the GMP knocked off.

However, back in 1948, theGovernment also wanted to make sure that you did not earn two benefits for the same period of service. Simply put, you couldn't be entitled to a GMP and an additional state pension benefit - it'd be like getting flying pay whilst being on PA Spine. So, the service pension/GMP deductions that are catching up with you and which you are currently being pinged with is what you are complaining about (I assume).

But its not all that bad. The good news is once these deductions have been applied, they remain at the same level each year. So as your pension increases, they will take away an ever smaller proportion. Back in the day, you had options (opting out of AFPS would have been the most drastic!) and you could have asked to pay your extraNational Insurance Contributions (thereby compelling the RAF to pay extra too) to remain in the Various guises of State Additional Pension Schemes (ie; not contracted out). However, those types of occupational schemes which left employees and employer paying higher NI contributions for the full Additional State Pension, generally had a less generous pension structure ie; a smaller final salaryaccrual rate.

So, in summary, you got a benefit when you started 'saving' via AFPS and if you live long enough, you're quids in again! For a more leisurely belt and braces explanation, have you tried the Forces Pension Society?

Forces Pension Society - Fighting for the Forces and their Families

I reach age 65 in three weeks'time, but have in my possession the annual tax statements for all 14 years of my service from 1963 to 1977. (At one time I had all my pay statements in a box in the attic, but threw them out and kept just the tax evidence) It is clear from these that "GP & NI" contributions were deducted from my pay during my service. So, how do they claim that we didn't pay Graduated Pension Contributions between 1961 and 1980? Are we being robbed? A test case would seem to be in order.

.. NIC were reduced, not removed completely. Having said that, I'd definitely give the Forces Pension Society people a call. Its a technical matter from decades gone by and I imagine they will have this one squared away chapter and verse.

Pension Abatement
 

Hi orionsbelt,

I read your article with interest as I am just about to be on the receiving end of this ruling - 65 this month.

By pure fluke I heard about the NI Modification Rule when I phoned xafinity paymaster regarding another issue in May of this year. The person that I spoke to used the imortal words 'National Insurance Modification Rule'. As I did not have a clue as to what it meant I asked a few questions in order to get some understanding. I soon realized that I was one of possibly a privileged few who had early warning as to what was coming my way; I understand now that most people don't hear about it until it has happened.

Since May I have made several phone calls and most of them have come up with blanks. The most definitive answer I have been given, are you ready for this? All other ex-servicemen accept it why can't you?

Being a bit of a hoarder I found a one-page document amongst other paperwork from when I left the forces 25 years ago. It reads:

Service Pension will be abated at age 65 by a statutory weekly amount of 1.667p for each complete year of reckonable service before 1 April 1980, subject to a maximum deduction of 80p a week. Maybe a play on words on my part but there is no mention of RPI, CPI or any other inflatory tool being applied.

Mudge:confused:

Newsletter
 

orionsbelt,

Like you I could not find it in the newsletter. When I asked the question (one of my many phone calls) why it was not mentioned the answer that I was given was "We only put in what we are told to put in".

Mudge

Modified Pension Rules
 

Hi Chaps

Thanks for your input, given your comments I think its time to start making a fuss again.

It’s worth £15 a month to me.

Somebody at XP has interpreted the rules in some manner, but nobody can supply a reference document or statement that defines what is happening.
Where is the rule recorded / defined / authorised? What is the authority that allows then to do this????

A bloody minded ***
Check back in 6 weeks

Chuggers,

Re your #34.. this reminded me..

.. of another recent stellar SPVA performance.

If a pension sharing order is made against a member of '75, the ex-spouse or civil partner (pension credit member - PCM) receives benefits at 60. For PCMs of '05, benefits will now begin when they reach 65 (see above). Therefore, in essence, members may have been able to take pension benefits at 55 but the ex-spouse etc could not. However, a successful challenge by a Colonel's wife on the warpath (I think!) resulted in change that enabled a PCM to take a pension from 55, hence the hasty revisions last year (above) with a reduction. All well and good so far (possibly).

But the changes were not handled correctly. SPVA somehow forgot to make the reductions and some PCMs received documentation showing the pension payable at 55 as the full rather than an actuarially reduced rate, although the PCM was lead to believe it was the reduced rate. Hence questions in the House and a rather big spotlight on SPVA again. Apparantly, one female PCM has been receiving a pension since 2009 and was recently informed by SPVA that it will now be reduced by 50%.

Business of the House: 26 Apr 2012: House of Commons debates - TheyWorkForYou

Something in the Mail today that also does not bode well:

Why did the tax on my private pension increase when I started drawing my state pension?


By Tony Hazell

PUBLISHED: 11:23, 8 August 2012 | UPDATED: 11:23, 8 August 2012


I am a retired prison officer, having served 34 years. I ceased work in 2010 and lived off my Prison Service pension until February of this year when, at 65, I became eligible for my state pension.


When I was living off my Prison Service pension, I was receiving £934.40 a month and paying around £60 tax.


But when I began receiving my state pension — which is £591.96 per month — the income tax on my prison pension went up so I am now receiving just £889.94 on this pension. What is the explanation? D.P., by email



Why has the tax on private pension increased now I've started drawing my state pension?


I was going to say there is a simple explanation — and there is. But then when I considered your tax affairs I quickly realised why so many pensioners get confused and end up paying too much or too little tax.


Let’s start with the basic answer. The state pension is taxable, although it is paid without tax being deducted. This makes life easy for non-taxpayers but can create a headache for those who have other pensions or do paid work.


In order to put your affairs straight, HM Revenue & Customs must, if your income is high enough, adjust your tax code and take extra tax from another pension or an employer.


Here’s how it works in your case. As a pensioner aged 65, you would have a personal allowance of £10,500 this tax year (April 6, 2102 to April 5, 2013). Your total state pension is £7,103.52 a year (that is £591.96 times 12). HMRC would use this to reduce your personal allowance to £3,397.
So, only the first £3,397 of your Prison Service pension will be tax-free.


The remainder will be taxed at 20 per cent.


If your Prison Service pension is £994 a month before tax and your state pension is £591.96, then your total tax bill should be about £1,706 a year, or £142 a month.


Incidentally, as you turned 65 in February your personal allowance should have been £9,940 for the 2011/12 tax year. If HMRC or the Prison Service was not aware of this significant birthday you may have paid too much tax that year.

Dig out your Coding Notice to check. This could open the door to a further rebate. If your income from pensions was less than £12,500 in the 2011/12 tax year, you are eligible to pay tax at just 10 per cent on at least some of the interest from any bank or building societies savings you have.


This is because the first portion of taxable income (£2,560 in that tax year) was taxable at a lower rate of 10 per cent, if and only if, that income came from savings interest rather than pensions or wages.This will have been taxed at 20 per cent by your bank or building so you could reclaim the difference.


If this is the case, you will need a R40 form from HMRC to claim your rebate.


In the previous year (2010/11), you would have received the personal allowance of someone under 65: £6,475.

To make sure you are paying the right amount of tax, contact HMRC and ask for form P161. Call 0845 300 0627 or go to HM Revenue & Customs: Home Page and type P161 into the search.


Read more: Why did the tax on my private pension increase when I started drawing my state pension? | Mail Online

Quote:

---

Let’s start with the basic answer. The state pension is taxable, although it is paid without tax being deducted. This makes life easy for non-taxpayers but can create a headache for those who have other pensions or do paid work. In order to put your affairs straight, HM Revenue & Customs must, if your income is high enough, adjust your tax code and take extra tax from another pension or an employer.

---

.. which is why retirement/pension planning for a non tax paying spouse/civil partner is so important. We all have an annual income allowance of (this year) £8105, or £10,500 if you're 65. The part a spouse (usually a wife) can play without realising it is huge, especially if you extrapolate matters over 30 or so years. Instead, invariably, a spouse's tax free annual allowance goes begging and is lost forever.

Rather, the money which goes into the retired household is invariably in the name of a male wage earner who has accrued an attractive military pension and then typically, an airlines and state pension which then gets taxed far too heavily and needlessly. Many retired officers and SNCO/WO will still be Higher Rate Tax payers in retirement (even more if the Lib Dems have anything to do with it); imagine paying 40% tax on £10,500 needlessly for 30 years.

Uncrystalising (or not using) a partner's personal pension has benefits too, in terms of estate/tax planning. One possible solution? Instead of AVCs/added years for your AFPS, consider diversifying and making best use of a partner's allowances. Finally, that letter mentions a 'private' (personal?) pension; it seems the writer had instead, an occupational pension. In this instance though, the type of pension would have little bearing on his predicament.