NEM Alignment
 

It is interesting that the PA NEM offers of alignment are now on the table and I have been given 28 days to decide whether to accept or not.
Is 28 days enough time for such a decision? What are the perceived benefits to remaining in the RAF for another 5 years, as opposed to the alternative where one could draw their pension and perhaps find gainful employment elsewhere (Babcock, MFTS etc) apart from the obvious one of a damn good wage? Is remaining in the easy option? What are your fellow thoughts on this offer? Is it better to leave at 55, receive your 75/05 pension, and then if remaining in the RAF is for you, accept an FTRS role on the new pension scheme?

Decision time!

We're all in different positions and circumstances so it's difficult but I would like to see some sort of confirmation of PA pay scale beyond 55. ATM, I am on Level 34 PA so would next years increment be the last I would receive so that my pay would effectively be cut for the next 4 years if I sign on?

Otherwise, having served over 30 years, I retain my 6-month PVR option (subject to service contingencies as ever), I remain on AFPS 05 and my pension increases. The loss of my immediate pension payment is an issue as we had planned to use that but otherwise I am struggling to see a downside, assuming I am happy to continue in full-time service.

The thought of an ADC job is enticing though (that's the 180 days per year job, not the bag carrier one) if I could persuade them to go for it.

Prescient. Let's assume a senior officer is in their mid 50s, on AFPS75 and has been offered extended terms to age 60. Bearing in mind that accruals on AFPS75 stop at age 55 or 34 years pensionable service and that transfer onto AFPS15 isn't the default setting if you have fewer than 10 years to push, does anyone know what happens?

The danger is, unless checked or opted out of, one's lifetime allowance may get breached if you slip onto 15 and continue to grow benefits for a further 5 years. The same applies to other ranks too, except it's 37 years service of course. The danger of breaching the lifetime allowance is less, but does anyone know what the drill is going to be?

Al, any advice on AFPS 05?

Jambo,

The decision you will ultimately make is a personal one, all you can do (as indeed you are trying to) is gather as much information as possible and make your own choice.

However, when you describe one reason for staying in as "the obvious one of a damn good wage" consider the following. I recently retired at 55 on AFPS05, and my immediate pension net income was approx. 62% of my RAF net income just prior to retirement. In other words, I only lost 38% of income by retiring! Therefore, assuming broadly similar figures for yourself, one could argue that by staying in you are actually doing so for approx. one third of your current wage. You are working all those hours to only be better off, in comparison to retirement, by about one third of your net salary. As one illustration you're working all those hours to be better off, compared to retirement, by a JNCOs salary, a figure which you probably don't consider "a damn good wage". Yes, there might be other benefits from staying, for example continuing to accrue pension rights, or maybe job satisfaction, social life, etc, but I would argue that "the obvious one of a damn good wage" might actually not be so obvious at all!!


Just checked my records, and here are the actual figures:

Last months RAF pay, net: £4170
First months pension income, net: £2670

My statement above was slightly inaccurate, the pension was actually 64% of my previous RAF pay. Thus if I had stayed in (not an option for me at age 55 prior to the latest extensions to 60) I would have been working a 40+ hour week in the RAF to be £18,000 a year better off than in retirement. Hopefully this illustrates my point that staying in for "a damn good wage" is very open to debate!

You are probably correct in describing staying in as "the easy option"!!

And someone can order you to get killed. And I don't mean your wife!

Get out, take as much dosh as poss and get a job at B&Q. You'll never look back.

SGC

Biggus - thanks for sharing that. Certainly a different and interesting perspective.

Bugger, I really do have a decision to make and the clock is ticking. :uhoh:

Same principle applies, JaJ. Don't forget that by staying in you continue to get protection benefits which might be useful. Biggus makes a very good point. Everyone different. It depends on your rank but research your options if the lifetime allowance drops.

Biggus thanks very much for your perspective.

Seems that those of us in this boat have a lot of thinking to do in the next 20-odd days. I know everyone has different circumstances, however if anyone gleams some interesting snippets that would help sway me, or any fellow Ppruner either way, then I would appreciate your input.

Definitely leaving this decision until the eleventh hour...

I'm also going to be an 11th hour man. The biggest factor for me at my late age though is next posting. An enjoyable flying job would keep me content. A god awful staff job requiring long hours would see me off. Problem is, I would like a cast iron guarantee of my next job before signing on and how likely is that in this day and age? What I haven't had chance to read yet is; do we automatically lose the option point at 55 if we sign on till 60? I know I can pvr after 30 years of service but that is more messy.

I've not received my letter yet but it is going to be an interesting decision with the complications of AFPS75 to 15 thrown into the mix, let alone the potential pension legislation in the future. I've already hit the final PAS increment level so it would be a flat line for me for up to 17 years.

One of the elements that seems grossly unfair is that a PVR in the future whilst on AFPS15 will see my AFPS75 pension abated under PVR terms, even though the scheme is closed. Having served for over 25 years on the 75 scheme why should a PVR 5, 10 or 15 years in the future see this part of my pension pot abated when I did not PVR when serving under its conditions?

PA,

Why is the PVR option more messy? I don't know if it will change under NEM, but it used to be that once you were over 50 you could PVR with 6 months notice to leave. Given the amount of resettlement you would be entitled to, and terminal leave, it comes pretty close to PVRing and then clearing your desk straight away! That doesn't seem at all messy to me.

I can't see any desk officer being able to make any guarantee to anyone prior to them making their decision, if for no other reason than at that stage the desk officer won't yet know how many will ultimately stay or go, and won't know how many cards he has to shuffle the deck and fill his slots.

Edited to add:


Ah - I've just seen JTO's post, maybe that's why the PVR option becomes messy?

Biggus - as I understand it, leaving at an option point entails no financial penalty. PVR'ing means an immediate loss of flying pay for the last 6 months of service. Ergo, if posted to an absolutely rubbish job, then it would be nice to have the option of leaving at 55 without cost.

Just to reinforce Biggus's post, there is also the big fat lump sum to factor in.

Party - the original poster mentioned they are on PAS - therefore no 'Flying Pay' to reduce on PVR. I'm sure there are other financial implications but the flying pay one doesn't affect PAS (warning - information from circa 3 yrs ago - may be expired - I stand to be corrected if so :p)

Sandy, you're info is still correct - I'm PA and do not receive fg pay.

Also, I'm on AFPS05 and as I'm less than a year to my 55 departure point, if I do sign on for NEM, I stay on AFPS05, but as JTO, I would be on the top increment of PA so would effectively be taking pay cuts every year compared to others.

I'm also concerned also about lifetime contributions and whether this applies to AFPS05 and if so, how much is it and how do I calculate how much I've contributed???

Perhaps I should add to the OP's questions to state that all aircrew of sqn ldr and above are being offered an extension of service to age 60 - not just PAS.

Not too sure about NCA as I sit here but extensions are definitely out there.

and another thing
 

From the OP -

My question - Does an FTRS engagement generate an abatement (or abeyance) to one's service pension (or lump sum even) that is already being paid ?

I ask, because this currently applies to teachers who take their pensions and then later return to teaching as 're-employed pensioners.' Catches a lot of them out and the pompous 'prevention of loss to the public purse' as if teaching in retirement was fraudulent, certainly doesn't seem to justify the cost of the harassment and administration. I ask because all government pension schemes are doubtless aligned and ruled by the treasury.

From JaJ –

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. NB I believe that for some odd reason, LTA doesn't apply to MPs and some other privileged folk.

From the SPPA website -

And BTW there is an Annual Allowance (limit) for contributions to your pension funds. Penalty for exceedance.

And ABTW, if your future FS pension (that you might not live long enough to receive) is deemed to have increased by more than a certain amount (because of a big pay rise for example) you receive on account of it, a whopping additional tax bill on top of your PAYE, to be paid here and now. I have yet to find any specific rules, rates or examples for this tax because the amount depends on your individual contributions and those of your employer, and the tax is personal between you and your employer and HMRC. As a result, one cannot do theoretical calculations as one can with ordinary income tax. In effect, it seems to be a secret known only unto the victims.

The pension rules change with the weather. Just what you don't need for long term planning. It's a nightmare. All the above subject to health warnings. Happy to be corrected. ............... LFH

Flash,

Your understanding is very good. The only things I would add are that you need to add to the figure of twenty times your final salary pension, the tax free cash and that any pension benefits taken pre 2006 are calculated as twenty five times, and not twenty. If the LTA drops, then it starts getting serious for a lot more people. Transferring deferred benefits is banned in about 5 weeks, new guidance allows you to leave your private pension to absolutely whoever you want, free of tax. Not so with an unfounded FS public sector pension though.

Since August 2011, if you exceed your annual allowance (£40k) and incur a tax charge of under £2000 then 'Scheme pays' rules apply (search: Annual Allowance Scheme Pays August 2011 etc). It's tosh of course, you pay because you get a smaller pension later on. Anything more than a £2000 tax charge, then you stump up via self assessment. The annual calculation is more complicated and revolves around a multiplication figure of sixteen, cash, start and finish date salaries of a few years and the inflation rates for September.

I hadn't heard that about the Parliamentary Contribution Pension Fund. I shall rummage around. If so, another appalling aspect. Various aspects of The Judiciary Pension Fund though? Well.. no comment!!! Ed Moribund has suggested though, he will allow using four years unused allowance, and not as it is currently, three. Steve Webb, the pensions minister, wants to scrap the lifetime allowance completely. It's almost worth arranging to get divorced, take a Benefit Crystalisation Event hit reduction, and then getting back together with your ex in time for a few more years accruals. But they might take the money and then run off with your best mate. Which would be doubly annoying.

Party Animal

NCA PAS within 5 years of exit date (55 or the new 35 years service) will be boarded in early April, (you didn't expect to be treated the same as the Os now did you)?

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.

:uhoh:

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.

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?

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?

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

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.

Thanks Al.

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

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

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

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.

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'

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

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.

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.

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!

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.

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.

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.

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?

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. :eek: