Pensions - Military and CS - being reduced NOW

Discussion in 'Armed Forces Pension Scheme' started by OldSnowy, Jun 28, 2010.

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  1. OldSnowy

    OldSnowy LE Moderator Book Reviewer

    Not sure if this has been spotted already, but this was in the papers yesterday. In short, buried in the small print of the Budget was the statement:

    "1.106 The Government will use the CPI for the price indexation of benefits and tax credits from April 2011. The CPI provides a more appropriate measure of benefit and pension recipients’ inflation experiences than RPI, because it excludes the majority of housing costs faced by homeowners (low income households are subsidised separately through Housing Benefit, and the majority of pensioners own their home outright), and differences in calculation mean it may be considered a better representation of the way consumers change their consumption patterns in response to price changes. This will also ensure consistency with the measure of inflation used by the Bank of England. This change will also apply to public service pensions through the statutory link to the indexation of the Second State Pension."

    Note the last sentence. Technical stuff, but in short it means that pensions will not increase as fast in the future as they have in the past. Your pension - whether you are getting it already, or paying into it now - is now less valuable than before the budget.

    Personally I find this morally vile. It affects those who have completed a period of service and who are being paid a pension they earned - their standard of living will slip gradually year on year as against the standard that they were lead to expect. For Civil Servants, the bit in the Civil Service Pensions Guide that states: "Your pension is guaranteed to increase in line with inflation, as measured by the retail prices index (RPI)" appears to have been ignored, or thrown away.

    I am led to believe that the difference will be around 1/2% per year minimum. That does not sound much, but if inflation is at 2%, and your pension increases by only 1% o 1.5%, it will pretty soon lose ground - and that's worse of course for those still contributing - they've got longer to be affected by it.

    So, doing our bit to get the nation out of the ole that Mr Brown dug for us - or a sneaky way to hit out at those who cannot object by strike action - srving Service personnel and pensioners?
  2. The question is will this affect my mil pension when it gets supercharged when im 55 in 7 years time?
  3. We should count ourselves extremely fortunate that we have an increase at all. Furthermore, there is a strong possibility that CPI will be higher than RPI in future. On this basis I am surprised that the Govt hasn't linked pensions to both CPI and RPI, paying whichever rate is lowest at the appropriate decision point.
  4. Auld-Yin

    Auld-Yin LE Reviewer Book Reviewer Reviews Editor

    While I acknowledge what OS has said, and agree that this is a snidey back-door cut to people who really can't do anything about it. How does a pensioner go on strike? :D

    However the RPI has been manipulated constantly by government to ensure the lowest possible rise in pensions. For instance last years RPI which was taken in September, (I think) showed a negative inflation figure so no increase in (NHS & public) pensions this year. The government said theyt were being kind as they could have reduced it!!!!!! However within a couple of weeks the inflation rate had risen but no increase to pensions.

    Bottom line is the government will work out how much they want to pay out then arrange the figures accordingly. Which index it is linked to is not really that important, they will still feck us!!
  5. Sixty

    Sixty LE Moderator Book Reviewer
    1. ARRSE Cyclists and Triathletes

    I’ve only had a cursory glance at your post OS (at work and quite busy) but if I’m reading correctly, it only applies to S2P rather than your Civil Service pension which would still be adjusted at RPI.

    I believe, from this first glance, that the guarantee would still stand in relation to your occupational scheme.

    Your S2P is likely to be very low anyway as you’ll be contracted out of S2P at the moment so anything accrued therein would be prior to or after leaving the CS scheme.
  6. Has taken a long time for the great unwashed (me included) to realise that no matter what 3 letter acronym our pensions are being based on, we'll still end up worse off than what we were during the previous 12 months. I'm glad I'm past 55 and have a reasonable lump coming in but despair for my children and grandchildren.
  7. I think your title for this post is a bit misleading. The pension is not being reduced rather a different measure is merely being used for the index linked element. As I think has been pointed out, this could actually work to the advantage of pension recipients.
  8. I am seriously considering starting my 5 month old son's pension now. No kidding.
  9. I am a completely clueless regarding pensions (it was not even in my mind when I joined).

    I am on the new system. A conservative estimate of 22 years service on the old pension calculator tool gives me approx


    per year upon leaving. Plus lump sum on top etc etc.

    But is that £9000 of today's money or 2027 money?

    If it is just 9 grand a year in 2027 it will prob be worthless!
  10. OldSnowy

    OldSnowy LE Moderator Book Reviewer

    Fair enough, there is of course a possibility that it will increase things - but having done a bit more research into this, I would suggest that the chances of this are slim indeed. I'll leave it to the relevant Mods whether or not to change the title, as I think that my deliberately rather inflammatory title stands. Apart from my natural prejudice regarding any changes whatsoever to pensions ever being to the benefit of the pensioner (that goes for AFPS, Civil service, State Pensions, etc) I just do not think that this specific change will benefit us.
  11. Considering the economic outlook & being pragmatic then I'm less optimistic, I'm on AFP75 & wary.
  12. Fixed it for you :D

    As I understand it, the pension calculator uses the latest table of representative rates which are published each year. See for the latest table.

    The calculator does not take inflation or future pay rises into account so it is highly unlikely that you will have to survive on £9000 a year (before tax).

  13. OldSnowy

    OldSnowy LE Moderator Book Reviewer

    Nope, your £9,000 is index-linked. The exam question here is, of course, which index is it going to be linked to? :)
  14. Sweet. Feel much better now. As for whcih index, I will leave that up to the economiserists on arrse to debate.
  15. As I see this he has not left yet so index linked will not come into the equation until he leaves. The (approx) £9000 is based on his rank when leaving (amongst other things).

    The CPI or RPI does not affect (effect?) his question.