A new pension anomaly coming up

Discussion in 'Armed Forces Pension Scheme' started by oldbaldy, Nov 30, 2011.

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  1. oldbaldy

    oldbaldy LE Moderator Good Egg (charities)
    1. Battlefield Tours

    We hear from our beloved Chancellor that pay in the public sector is being resticted to a max of 1% and as far as we know this will include the Armed Forces.
    As you know your final pension is linked to pay & pensions each year go up by approx the same as the pay for your rank.

    So if in April 2011 you retired on a pension of say £10k, it stands to reason in April 2012 someone of the same rank & service will retire on £10,100.
    However!
    The person who retired in April 2011 will get an uplift of £520, (CPI of 5.2%) ok you might not get it until your 55 but these things are worked on a compound basis. So the pensioner of 2011 is better off than the pensioner of 2012. Some people are going to have to do some serious thinking.

    This last happened in the 1970s & people are still feeling the repercussions of it.
     
  2. There was a discussion about a similar issue to this on PPRUNE and it was posted on there that the Forces Pension Society had been involved in talks with the government. Something to do with "Dynamising" our pension, basically due to the lack of any salary increases, service members retiring 2012 / 2013 could find themselves in a "Pension trough". The FPS has managed to negotiate the same increases in these pensions that individuals who retired before the pay freeze are entitled to. While you might not be getting a pay rise if you're still serving you're pension is still rising.

    Can't vouch for the accuracy of the statement, maybe someone on here is an FPS member and can enlighten us?
     
  3. oldbaldy

    oldbaldy LE Moderator Good Egg (charities)
    1. Battlefield Tours

    In fact this is the second year, I as a pensioner, received a higher increase in percentage terms than the uplift in pensions for those retiring in 2011.
     
  4. Well my 10 pounds a month uplift to my 50% war pension will be welcome.
     
  5. oldbaldy

    oldbaldy LE Moderator Good Egg (charities)
    1. Battlefield Tours

    This is a problem with a retired persons pension. Two completely different animals.
     
  6. No it is a problem with those about to retire. Those that retired many years ago did so at a much lower wage anyway so whilst I agree there may be a pending anomaly, it is just one of things.
     
  7. oldbaldy

    oldbaldy LE Moderator Good Egg (charities)
    1. Battlefield Tours

    Yes those who retired many moons ago, like myself, have nothing to worry about. I'm merely flagging up that those who retire in 2012 will have a lower pension in that year than those who retired in 2011.
     
  8. Oldbaldy is, of course, quite right in respect of AFPS 75 members. There is a degree of protection for those in AFPS 05 because of dynamising. That means that those who retired in AFPS 05 would have their final pensionable salary assessed on the best 365 consecutive days pensionable pay in the last three years - this means that pay, which was paid over 12 months before, is inflated in line with the inflation factor (currently CPI) prior to comparison.
     
  9. oldbaldy

    oldbaldy LE Moderator Good Egg (charities)
    1. Battlefield Tours

    Thanks for that FPS. I didn't realise there was a difference in this for 75 and 05 members. As I say some people are going to do some serious thinking & I can only suggest they speak to a pensions specialist or your goodselves about their particular situation.
     
  10. How much lower (By the time they are 65)? Is it going to be a massive difference?
     
  11. oldbaldy

    oldbaldy LE Moderator Good Egg (charities)
    1. Battlefield Tours

    The problem is Stacker, no one knows as these things are compounded & we also don't know how many years this same thing will go on for.
     
  12. Won't the person who retires in 2012 also get an uplift (in 2012) leveling it out?
     
  13. oldbaldy

    oldbaldy LE Moderator Good Egg (charities)
    1. Battlefield Tours

    No because as I say these things are compounded.
    For instance.
    A pensions is awarded at £10K in 2011
    In 2012 there is an increase of 5.2% making at new rate of £10520.
    In 2013 a further increase of say 5% making a new rate of £11046.

    Because pay rates and so pensions have not increased the intitial pension of someone retiring in 2012 remains at £10K.
    In 2013 he get the 5% and so pension increases to £10500.
    So the person retiring in 2011 is £546 pa better off in 2013 than the one retiring in 2012 and as I say these are compounded and each subsequent year difference will get wider.
     
  14. I'm not following this, the 2011 bloke is 546 better off because he has had a years more interest. Somone who retires in 2010 will (presumably) have one more years interest than the 2011 bloke (and so on as you go further back)
     
  15. oldbaldy

    oldbaldy LE Moderator Good Egg (charities)
    1. Battlefield Tours

    Your right as far as you go but in each of the years going back there was an increase in starting pension because of the incease in salary, there will be no increase, as far as we know, in 2012 hence the anomoly.