preserved pension

Discussion in 'Armed Forces Pension Scheme' started by tafft, May 3, 2010.

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  1. tafft
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    tafft Old-Salt

    Please has anyone got any idea on what I can expect from a preserved pension,9 years service with the rank of corporal.
     
  2. Idrach
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    Idrach LE

    9/70s of your final salary under APFS05 (from 65) + 3 times that in grant.

    APFS75 is much more complex - you could (and should) ring JPAC?

    A ball park guess (assuming you left in the last 5 years or so) - making loads of unwarranted assumptions - would be:

    APFS75 - somewhere in the region of £2000 from 60 and about £3600 from 65.

    APFS05 - somewhere slightly south of £4000 for high band, a couple of £hundred less for low band, from 65.

    If you are older, it gets much more complicated (and less) because of the greater variation between current pay rates and older rates + inflation linking ...
     
  3. Depends on when you served. Just got the details for mine based on similar criteria;

    1. Your pension is what is known as a “Defined Benefit” or “Final Salary” Scheme. Your pension benefits relate to your final salary when you left your employment and the number of years of employment. Your normal retirement date (NRD) is shown in the “notes” as age 55 in 6.84 years time. However, the letter from Service & Veterans Agency states
    this is now age 60 in respect of service prior to
    April 2006. For illustration purposes I have used age 60 in this review -although legislation allows you to receive retirement benefits for your “protected rights and non-protected rights (ordinary rights)” at any age from 55 to 75.

    2. Your “notional” transfer value is quoted at £38,251.84. This includes an
    unspecified amount in respect of “protected rights” (PR) described in your statement as either protected rights or GMP. It will be calculated in the event of a transfer. This element would have arisen from your being contracted out of the State Earnings Related Pension Scheme (SERPS) also known as the State second pension (S2P).

    3. The practice of the Armed Forces Pension Scheme is to credit your pension with increases in line with the “Retail Price Index” (RPI) – but these are capped at a maximum of 5% p.a. The recent rate of RPI has been between 0% and 3.75% having been 2.4%p.a. for many years. Your protected rights will increase in line with government legislation. This rate is hardly exciting. There is no Armed Forces Pension Fund as such. All claims and benefits are a charge to the Exchequer and paid from general taxation. So it is no more than a paper promise.



    4. The Financial Services Authority - the Regulator - requires pension benefits of personal pensions to be illustrated at growth rates of 5% per annum, 7% per annum and 9% per annum compound. These figures are
    not a guarantee, but the regulator believes that such projections give a
    pension member a good indication of possible future pension fund values.
    Certainly, over a period of time, well-managed funds can be expected to grow between 8% and 12% per annum compound. If the regulator’s growth
    rates are applied to your total transfer value of £38,251.84, over 11.84
    years to age 60, it results in projected values illustrated in the example
    below.


    Example at age 60

    Projected Values *

    @ 5% per annum £ 68,161.00
    @ 7% per annum £ 85,223.00
    @ 9% per annum £106,116.00

    The Department for Work and Pensions (DWP), has announced that from
    October 2008 protected rights monies may be invested on the same basis
    as non-protected rights. Hence if your transfer value includes protected
    rights or “Post 5th April 1997 Section 9 Rights” such values are included in
    the above projections.

    * It must be emphasised that these are mathematical projections to illustrate the effect of different growth rates. No allowance has been made for charges as these will vary by provider company, the investment manager selected and the type of pension plan. Funds not invested are held in a high interest bearing bank account. The rate of interest credited is variable. Current interest rates payable are those published by Cater Allen Bank Limited (a wholly owned subsidiary of Abbey National Group plc). The value of investments can fall as well as rise. Past performance is no guarantee of future performance.


    5. Your estimated Armed Forces pension at age 60 is shown as £2,202.38p.a.
    If this is increased in line with the historic rate of RPI of 2.4% p.a. then at
    age 60 it would be £2,916.77p.a.

    If you transferred your pension fund so that investment growth was not
    restricted, and you achieved a fund value as shown in the above
    example at the middle projection rate of 7%, it would provide a fund of
    £85,223.00. On the basis of today’s annuity rates - and if you were aged
    60 now - an open-market annuity could be purchased of c. £5,499.00p.a.

    Using the same assumptions for the projection rate of 5% you would have a projected fund of £68,161.00. This could provide an annuity of circa £4,398.00p.a. Either represents a substantial improvement over your projected Armed Forces pension.

    Although for illustration purposes I have used an “open-market” annuity rate, the income drawdown option discussed later in this review can provide a larger pension income.

    6. A transfer to a “Self Invested Personal Pension” (SIPP) under your control
    would allow you to receive up to 25% of the value of your pension fund as
    a cash lump sum, known as the “Pension Commencement Lump Sum”
    (PCLS), free of UK income tax at any age between 55 and 75.

    7. A “Pension Commencement Lump Sum” availability of £6,607.13 is
    indicated in your Statement of Benefit. If this is increased by 2.4% p.a. to
    age 60 it would be £8,749.00. By comparison you will see that 25% of any
    of the above projected values is very attractive. For instance utilising the
    7% projection in the example you would have a projected fund of
    £85,223.00. This would provide a very attractive cash lump sum of
    £21,306.00. Utilising a projection rate of 5% on the same basis, would
    provide a PCLS of £17,080.00.

    8. I would also draw your attention the death benefit payable to your spouse
    of only 50% of your pension if you should die before retirement age. This
    will be adjusted to reflect your age at death if it should occur before your
    normal retirement age. If death occurs after retirement age it is still only
    50% of your pension. However if you should die within the first five years
    of taking your pension the balance of the first five years unpaid pension
    benefits will be payable as a lump sum. After five years no lump sum is
    payable. This still reflects what can only be described as an outdated
    approach to the realities of life.


    Hope this helps!
     
  4. tafft
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    tafft Old-Salt

     
  5. Idrach
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    Idrach LE

    I think they are trying to sell you something ...
     
  6. Idrach
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    Idrach LE

    So, I suspect it will be somewhat less than my figures - best thing to do is to ring JPAC (you will have to write to them anyway) on 0800 085 3600 and then you will have to fill in a claim form.
     
  7. I know, I am just using them to do the leg work, I am pulling it out and putting it my own RRSP. My service was 1980-1990.
     
  8. tafft
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    tafft Old-Salt

    Already done,waiting for the letter,just wanted some idea.
     

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