GIP and Army Pension Query?

Discussion in 'Armed Forces Pension Scheme' started by oxygna3, Jan 9, 2012.

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  1. Hi,

    Sorry if this has been brought up before, I have had a look around and can't find anything on it anywhere. After injury I have recently been informed by the Armed Forces Compensation Scheme that I will receive a tax free GIP (Guaranteed Income Payment) from the day I leave the service. I am not being MD'd or anything at present and still have three years left to serve. My problem is that I do not understand how the GIP works in connection with AFPS75 which I am currently on. Does anyone know if the GIP (which will pay more that my AFPS75) will cancel out my entitlement to my AFPS75 pension, or is the AFPS75 pension somewhet reduced???

    Many thanks!
     
  2. The award of a GIP is separate from the AFPS pension you are entitled to. The GIP takes into account the impact of your condition on future income and will take into account the amount you are getting by way of occupational pension. Further help on AFCS benefits can be obtained from the SPVA website and help in determining/securing what you are due may be sought from the Royal British Legion.
     
    • Like Like x 1
  3. Thanks for your reply, I've been trying to find out by looking on the AFCS site but it looks like the GIP is abbated by 75% when in reciept of a full pension. Any ideas on this / am I getting it wrong?
     
  4. Your GIP is abated by the pension amount. So if your GIP is £20000 and pension £10000 you will receive £10000 GIP, £10000 pension.

    Apparently this is because you cannot be compensated twice for the same injury or condition.

    But since when has a pension been compensation? The MoD may have a point for those who have not completed 22 years, but subsequently receive an immediate pension on medical discharge.

    However for those of us who have or will complete 22 years then we've worked for nothing and the MoD misses the point that we would, if fully fit, have the potential to earn the sum the GIP compensates us for IN ADDITION to the service pension.

    No one can give me a straight answer on the final lump sum and commutation all with regards to AFCS and GIP.
     
  5. Dingerr, unless I'm mistaken, and SPVA Glasgow have got it wrong, if you are medically discharged there is no commutation.
     
  6. EScotia is 100% correct. If your MD then when completing your PEN 1 you have to ensure that you tick the box for non commutation.
     
  7. Dinger, From what I can dig up on this you're absoloutley right - and what was confusing me was the wording that you can't be compensated for the same injury twice! So that would indicate that the goal posts for a 22yr pension shift from being for serviceserved, to being compensation for injuries sustained.

    In my circumstances the GIP when reduced by 75% against my service pension makes a difference of a few pence. Therefore, I can either hang in another 3 yers for a lump sum and the same pension (which may actually end up less if it's taxed - which is another point I am unclear on)).

    Here's a link to the AFCS Booklet which explains it but I found it slightly confusing, especially when it perceives a 22yr pension as compensation. Have a look at p.15 where it explains that the GIP is reduced by 75% against an Immediate Pension (IP). However, immediate pensions are taxable, which as I mentioned earlier, may result in actually receiving less that if you were only on the GIP.

    http://www.mod.uk/NR/rdonlyres/526B60F0-4D05-4ECF-83C7-19978D3B295A/0/afcs_booklet.pdf
     
  8. Do you receive the final lump sum, but just not allowed to commute it?

    This is ridiculous. Once I have served my 22 years I should be entitled to the same conditions as everyone else with regards to pension.

    It seems like although I will receive GIP I will effect have to give up a full pension for the privilege.
     
  9. Dinger,

    refs your previous post, that's what's been confusing me. Below is a link to the AFCS booklet. Have a look at P15. It states as you said - that the GIP is reduced by 75% of the amount of the Immediate Pension (IP). It then says that it is because you can't be compensated for the same injury twice, which again as you said, would indicate that the goalposts of our 22yr pensions shift from being for time/full career served to compensation. Therefore, it all looks a bit buttered up to be honest.

    In my case the difference between the GIP and the IP pension is minimal and makes a difference of pennies at the end. Therefore, if it's the GIP which gets reduced by 75% of the IP, that would indicate that I'd recieve 25 GIP and 75% Taxable IP which which would actually mean I'd get less!!! Surely that can't be right??? If so, that would mean that if I decided to leave tomorrow, I'd be on more money (tax free) and only be less the lump sum!

    http://www.mod.uk/NR/rdonlyres/526B60F0-4D05-4ECF-83C7-19978D3B295A/0/afcs_booklet.pdf
     
  10. (tried to post this twice already but it hasn't shown up yet - maybe because I tried to post a lonk on it?)

    Dinger,

    refs your previous post, that's what's been confusing me. Google the AFCS booklet pdf and have a look at P15. It states as you said - that the GIP is reduced by 75% of the amount of the Immediate Pension (IP). It then says that it is because you can't be compensated for the same injury twice, which again as you said, would indicate that the goalposts of our 22yr pensions shift from being for time/full career served to compensation. Therefore, it all looks a bit buttered up to be honest.

    In my case the difference between the GIP and the IP pension is minimal and makes a difference of pennies at the end. Therefore, if it's the GIP which gets reduced by 75% of the IP, that would indicate that I'd recieve 25 GIP and 75% Taxable IP which which would actually mean I'd get less!!! Surely that can't be right??? If so, that would mean that if I decided to leave tomorrow, I'd be on more money (tax free) and only be less the lump sum!
     
  11. So those who have completed 22 years and MDdwill have their GIP reduced by the 75% value of their immediate pension (eg pension of 10k, GIP abated 7.5k). GIP and pension not taxed.

    Those MDd before the 22 year point will have their GIP abated by the full value of the pension.

    How ever I would argue that if you serve to the 22 year point then you have earned your full pension and it is not paid in relation to you being injured, but paid because you have served your time and is therefore a retirement pension. To that end having served 22 years you should receive the pension under the same conditions as everyone else and should be taxed as everyone else. The GIP is a seperate issue.

    If you are serving your time I take it you're not being MD'd.

    I still can't see any mention of the 22 year gratuity or commutation.
     
  12. From JSP 765:

    100% Abatement

    Soldier awarded a £20,000 GIP and is medically discharged with an ill-health pension of £12,000 (for the same condition).
    Abated GIP = GIP minus 100% of pension = £20,000 - £12,000 = £8,000
    Total payment on discharge = Pension (tax free) + Abated GIP (tax free) = £12,000 (tax free) + £8,000 (tax free) = £20,000 (tax free)

    75% Abatement

    Soldier awarded a £20,000 GIP and is discharged with a normal pension of £10,000.
    Abated GIP = GIP minus 75% of pension = £20,000 - £7,500 = £12,500
    Total payment on discharge = Pension (taxable) + Abated GIP (tax free) = £10,000 (taxable) + £12,500 (tax free) = £22,500 (of which £10,000 is taxable) = approximately £20,000 after tax

    Looks like we're all fucked whether medically discharged before a full career or after! The only bonus I can see is you should get your tax free lump sum from your 22 years and your AFCS lump sum (compensation payment) tax free.

    Dingerr, its worth you ringing SPVA Norcross and having a chat before its on top of you and too late!
     
  13. The pension is not compensation but the the AFCS pays a Guaranteed Income Payment (GIP) and your pension is part of income. That is my understanding of the logic. If the original poster would like his personal position regarding pension examined he should join the Forces Pension Society and we will explain it for him. ( The Forces Pension Society )
     
  14. Many thanks, I'll get in touch.

    Dinger, not being MD'd at the min but just summing up if it's worth hanging around in a JOB with no further promotion prospets for another couple of years for the sake of a lump sum, which would appear to be the only difference it'd make.


    Looking at it from a different angle some may even end up worse off by completing their full service, eg:

    If I left now with a tax free GIP I could earn up to 35k per year and pay 20% tax - the GIP shouldn't affected my tax bracket as the GIP is tax free, so the GIP would be additional to my salary. But the lump sum would be sacrificed if I went early.

    In contrast, if I stay until the 22yr point, where most of my pension will be taxable, and therefore would be taxed against my earnings. This would mean that my earnings and pension would be added together and if the combined figure breaks the 35k mark, I'll be paying 40% tax. But I'd have a lump sum.
     
  15. well thats easy

    your abatement rate changes from 100% down to 75% so sticking tit out means your 25% better off, on a gip of 20k wiht an anual pension of 8k your going to receive around 22k, the anual pension wont be taxed by then (basic rate of tax of 10k from april this year) meaning your going ot be 2k more income by staying the course if your 22 year pension is over 10k then your loosing 20% off it to the tax man + loosing 75% of the gross ammount against the GIP but even so your still overall better off doing the full 22 years, i cant comment about the lumpsum so much because i seem to remember something about abatement rates on those as well ....

    your best bet to get an accurate answer is to take FPS up on his advice and services