RIPPED OFF BY THE NEW PENSIONS SCHEME ?

Discussion in 'The Intelligence Cell' started by agoodgrouping, Feb 10, 2004.

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  1. Interested ? - you should be. The new Pensions deal has been announced and will soon be on your P1Os. Always a mysterious topic, we have somehow allowed a highly contentious, badly consulted and unfair new scheme to replace a scheme the Forces Pensions Society declare was the worst in the public services.

    Is this better than today`s scheme or worse ?

    EDP Reality: No resettlement commutation, 50% reduction in your pension from 40-55, no indexed linked uplift for all inflation increases to 55, 25% reduction in your pension from 55 - 65, lump sum based on (lower) preserved pension at 65 (if you are alive).

    Ball park figures - most people ₤100k+ worse off (unless you die in Service). Widows & partners of personnel dying in service better off.

    Treasury -₤100m better off (their own figures on the Press release).

    "supported by senior Service personnel branches" who, why, when ? Were YOU consulted ?

    "It sounds bad but I'm ok, I'll stay on the current scheme" - is self interest really the way forward for the Armed Forces ?

    Absolutely appalling........but you do the maths and see it too.



    Watch & Shoot... Wilson, how we have allowed this snake to sneak up & bite our arrse ?
     
  2. I've been out since 1999, and will be awarded a half pension + 3 times the amount in a lump sum when I'm 55. However, since leaving, I haven't the foggiest what it's now worth or projected what it will be worth, whether or not these new rules apply to my pension, what, when, why. The Army pensions office hasn't updated me since leaving, and the paper work I was given on leaving just said contact them a few months before my 55th birthday and apply for the pension. I mean, I don't need constant commentary on any little change that happens, but it would be nice to be told just what is happening and if it applies to me.
     
  3. Gunny, it depends how long you served & what sort of pension you are on. If you are already in receipt of a Immendiate Pension on completion of your engagement (16/22) then you won't be affected. Your pension will be increased when you reach 55. A point though, if you are in receipt then you won't be getting a lump sum at 55 because you should have received that 3 times lump sum when your pension started.

    If not on a pension already, you are talking about your Preseved Pension. This is paid to you at 60, not 55, and that is when you get your lump sum. One of the drawbacks of this new scheme is that ALL those serving will not get the proportion of the preserved pension earned (after a date tbc) until they are 65 if they leave before completing their engagement.

    Cheer up, it's only money.
     

  4. Nooooooooooooo !! WTF I'm I supposed to do with the lump sum at 60 years old? At least at 55 I may still have a 'spring' in my step ! Just my luck if I kick the bucket aged 59 years, 364 days, 23 hours, 59 minutes and 59 seconds, wibble, etc !!
     
  5. I wouldn't touch the new scheme with either a barge pole or the shitty end of a stick!

    The shift in the preserved pension eligibility date is a disgrace, as is the new compensation scheme, which changes the burden of proof - we don't have a say in either of these cases!

    The new scheme will only reward those who stay for the full career duration - most of us don't have this choice as there aren't enough seats for bums further up the table. For everyone else, as pointed out, the replacement for the Immediate Pension will be slashed by half. This appears to be mainly a cost balancing exercise by the MOD in anticipation of inevitable legal challenges based around the pension rights of unmarried partners, disparities in the terms of service between officers and rankers etc.

    What galled me was the lack of consultation - I worked out that about 0.06% of the Service population had been consulted and the Commons Defence Committee estimated that, on average, each unit would have had one copy of the consultation paper! Indeed, the scheme has been described as "arbitary and unfair". This is one of the reasons I am voting with my feet and look forward to being promoted to "Mr" sometime this year! I will then be able to vent my spleen publicly as I can't do at present.

    This lack of representation is one of the reasons I think we need some sort of Armed Forces Federation, similar to the Police model.

    If you offer peanuts, you will get monkeys...... :twisted:
     
  6. The effective date for the change to preserved pension entitlement has yet to be decided, I would not be surprised to find it is 1 Apr 07 either though.

    There has been no mention of the Resettlement Grant (payable at the 9 year point for Offrs & 12 year point) in anything I have read – is this also being cut/lost ? This has traditionally been the exit point for many people wanting to start a second career at 30 and gave a small financial lump sum to cushion the transition.

    The MOD are the ones who have driven this “cost neutral” approach, even the Defence Select Committee questioned their reasoning…I recommend the DSC First Report to anyone and it is on the web. Whose side are the MOD on ? Treasury or Service personnel ?

    The Telegraph throughout has got this scheme spot on, last Sept they were saying the EDP would cut the pensions by two-thirds. The MOD confirm in their notification that this was their intention but the reduction in the immediate pension would have been too difficult to defend (or similar words).

    Using the example the MOD have issued it is now possible to do a comparison of “old & new” on your Excel spreadsheet. I based a calculation on a Sgt leaving today at 22 years and living to 80. At the moment he gets a lump sum of 25.8 k and a pension of 8.6k at 40. However, if he takes max resettlement he can boost this to 39.3k, but his pension is reduced to 6.9k from 40 – 55. Using a stored APR of 2.8% for this dormant period, his pension jumps up to 13.4k at 55 and then goes up with inflation (again I have valued in 2.8%) until he dies at 80 when it is 25k.

    On the new scheme he gets a lump sum of 25.8 k at 40 but his pension is a paltry 4.3k (50%) from 40 –55, 6.9k (75%) but index linked from 55 – 65, then upgraded at 65 to 100% of the rate 22 year point 8.6k. He also gets a lump sum based on three times of the pension awarded at 65 which is then indexed linked until he dies at 80 when it has risen to only 13k.

    So, what’s the figures ???….take a breath & do the maths yourself ..but I’ll give you a clue below








    I have it at over 250k loss, but obviously this will rise with the rank. It is just appalling and there doesn’t appear to be anyone interested about it. I doubt a letter to a MP would do any good, we appear to have been stitched up by a deal that no-one told us the key details about until it was too late.

    Sgt Wilson, hand out the rum ration, things are going to get tricky !
     
  7. Gunny,

    The pension people will not give you an update unless you request one.

    The address is:

    Army Personnel Centre
    Personell, Pay and Pensions Administration
    Pensions Division
    M P 480 Kentigern House
    63 Brown Street
    Glasgow
    G2 8EX

    I left in'87 and have had a couple of updates since then, the pension will grow at RPI. Always include your army number in any enquiry.

    Hope this helps.

    Beef
     
  8. X-Inf

    X-Inf War Hero Book Reviewer

    1"@100M says "Whose side are the MOD on ? Treasury or Service personnel ? "

    Well the answer is ridiculously simple. They are civil servants who may get posted to treasury ergo always back treasury. Serving personnel? Just numbers on a data sheet to them.
     
  9. Could someone put this into laymans terms for me and many others?

    If i leave the army after 22 years will i still get my lump sum and immediate monthly pension if i remain on the current scheme?

    Can the MOD legally change the financial goal posts like this whilst i am effectivley 3/4 through my career?

    Unless you have a crystal ball and know that you are going to serve beyond 22 years commisioned etc, i see no reason or advantage at all for changing to the new scheme.

    Apologies if these questions come across as naive, but as this is a hot topic in my circle of friends i thought i would consult a wider audience, as we are currently banging our heads against lots of brick walls trying to get straight forward uncomplicated answers.
     
  10. CEM - ref your last, as I understand it the pension scheme you have now cannot be changed by MOD without your consent - ie you asking to move to the new scheme.

    It is illegal to change any part of an employment contract (your pension scheme is a part of the contract you signed up to when you joined the army) without consent on both sides. That is why MOD are saying that those who wish to will be able to change to the new scheme sometime after it is introduced.

    Personally I cannot imagine anyone wanting to - what are the incentives?
    1 - no gratuity
    2 - only 50% of what you would get on the old scheme between 40-55 and 75% between 55-65.

    These are incentives? OK, so they have improved the benefits for death and injury in service and to partners etc, but how many of us are going to lose 100k+ (estimated) to go for that?

    Seems unfair to you? Well, I wouldn't disagree. There is a thread on this in finance which I have already posted on, but just in case you can't be arrsed, there is one point it seems only fair illustrate.

    The Defence Minister, Iver Caplin MP, was quoted telling the Common Select Defence Committee something like 'the Armed Forces Pension scheme is one of the best, if not the best, pension shceme in the public sector.

    However, Mr Caplin was being a tad economical with the truth. I understand that the best public pension is in fact the one MPs get. Assuming the information I've been given is correct, they get 1/40th their salary for every year they sit in Parliament. So, if they do 22 years (as we have to get an immediate pension), they 22/40ths - that is over half their salary. Even the new scheme will only pay 1/3 of your annual salary. So I would say it is pretty hard to argue which one of the two is the better. Now I freely admit that I don't know when they are eligible to actually start getting this pension, but as they currently get paid something like £37K a year, that is going to add up to £19K+, which seems pretty generous to me! I also don't know if it is indexed linked, but since they vote on it themselves, I think it probably is.

    And how do they get away with this? Coz no-one seems to know about it! I bet if Mr Joe Bloggs knew how much his MP was getting in pension benefits, he'd be pi55ed off (especially if he has just seen his own pension screwed on the market!). So, contact your MP, TB, GB etc and ask them about their very nice pension. Better yet, include the media in that distribution list!
     
  11. I find it interesting that people are asking whether it is better to change pension or not? Facts are boys you are changing whether you like it or not.

    Keys points (from my reading of the reports)

    1. 'A' day (date from which new pension rules are in force) believed to be in Apr 2005.

    2. You have to choose what pension to be on by 2007.

    3. If you remain on the old pension you only retain the existing rights (ie Immediate Lump sum etc etc) for the amount of pension you have earned upto 'A' Day. Any pension after that date until you retire is preserved until you are 60. ie for an officer who has served 10 years by 2005 could still retire at the 16 year point but would only get 10/16ths of his pension immediately.

    4. Down side of new pensions are already well documented.

    Therefore I have a few questions

    1. Can the government force changes to my terms of service (ie pension) without my consent. Because even if I stay on the old pension the rules will have been changed?

    2. The AFPRB (Armed Forces Pay Review Body) take into account ornon-contributary pension when calculating our pay. If the pension is now worth less have I been underpaid since I joined?

    3. Who is going to fight our corner? MPs No...., Senior Officers No......., A Mild Mannered Janitor.......Could be



    For the younger of you thats Hong Kong Phowee No 1 Super Guy....
     
  12. I believe that after "A" Day, the preseved benefits accrued from that day onwards are payed out at 65, not 60 as is the case now. I think those on the current package, who sensibly decide not to change to the new scheme, should notice no other difference - if they do their full 16 or 22, this will not be noticed. I was worried if the return to index-linking at 55 would be dropped but this appears not to be the case - I'm sure they would drop this if they could.
     
  13. Mr P

    I agree but one important point about the index-linking. At the moment, once you have earned your immediate pension at 37/40 it then attracts hidden Pension Increases (PIs) from the date you leave until you are 55 based on Retail Price Index. These hidden PIs are added to the pension you have been paid until you reached 55 and the pension is upgraded with these PIs eg if you left at 53 and your pension was 10k, the RPI is, say 10%. You stay at 10k until you are 55 when your pension goes up to 12.1k (the hidden PIs mean that year 10k becomes theoretically 11k in year 1, 11k becomes 12.1 in year 2).

    The crippler about the new scheme is that your EDP(pension) stays the SAME as it was at 40 when you are 55 (so you have lost the 15 years notional PIs) and and PIs are then calculated on ONLY the 75% of the amount paid from 55 - 65.

    At the moment the RPI is at a 40 year low, obviously this will be increased in some economic cycle. An increase in inflation rates will mean that the EDP will be of little realistic value - and the Govt actuaries have recognised this and it is a MASSIVE saving for them (100m-125m pa).


    To put the financial reality I'll use the Sgts figures based on RPI 2.8%

    Age 40 Age 55 Age 65

    Old Scheme 8612 (to 55) 13032 +RPI 17162 +RPI

    New Scheme 4306 (to 55) 6459 +RPI 8612 +RPI

    In fairness the HCDSC MPs also queried this, Mr Roy and Mrs Squires spotted this in their questioning of Mr Caplin and Mr Irenmonger in the First Report. They appear far more supportive of service pensions than our own MOD officials were, read the Reports – they are fascinating

    GG
     
  14. This is from the HCDSC Written response to the MOD

    Will some of the cost savings the Ministry of Defence will be making under the new pension scheme go to pay for pensioners' improved life expectancy, rather than to improve the benefits available under the scheme? (Q9)

    In a commercial scheme, the increased cost would commonly be dealt with either by increased contributions from scheme members or by a reduction of benefits elsewhere. It is considered reasonable that members should bear some of the burden of the increased costs given that they will benefit through longer enjoyment of a pension in retirement. In its own work, the Department has taken the view that, in broad terms, it is people in the new scheme who, being younger on average, will stand to gain most from the increases in expectation of life. In redesigning the new scheme, the Department has therefore taken the opportunity to make savings in the Early Departure Payment scheme worth around 1.7% of the Service pay bill to cover the longevity cost. Nevertheless, this saving will not immediately feed through to the cost of currently accruing scheme liabilities, because for some time the largest part of our Service personnel are expected to be on the current scheme; the only longevity-related saving on the current scheme will be the change in the age for payment of preserved pensions for future service from age 60 to 65.


    The saving on the new scheme has been taken predominantly from the redesign of the early departure benefits which will replace the current Immediate Pension. We consider this to be reasonable given that longer expectation of life is being accompanied by an improved fitness to work for longer; this is reflected in the Government's recent policy initiative on longer working lives[27]. In the case of the Armed Forces, we also consider that those Service personnel reaching the age at which Early Departure Payments would become payable will have much better transferable skills for achieving a successful second career than their counterparts in 1973, when the current scheme was designed. It has never been the objective of the benefits paid at full career that a Service person should be able to retire at age 40 with a full pension, allowing immediate retirement, and, overall, the Department now considers it reasonable to reduce the value of the benefits paid to those leaving the Services at mid-career; this is reinforced by the fact that the change from an Immediate Pension to an Early Departure Payments scheme will give greater flexibility in the design of the phasing of payments which will enable us to focus them more efficiently on the periods of greatest vulnerability after leaving the Services.


    The redesign of the pension scheme in the light of public consultation has balanced savings in some areas with improvements in benefits elsewhere. Savings have been generated by reducing the value of the Early Departure Payment scheme (formerly Immediate Pension) and by moving the preserved pension age to 65. These savings have been used to fund improvements to dependants' benefits (notably the increase to widowe(er)s' pensions), the provision of unmarried partner benefits, improved death-in-service benefits and the cost of providing benefits over a longer period arising from improvements in life expectancy. The Government Actuary's Department has produced a note setting out the make-up of the new scheme's costs and this is attached at Annex A.

     
  15. Mr GG

    Ouch - I didn't think that this was the case! 8O

    It was a good performance by Rachel Squire last month and, just when you feel "they're all the same", one of them bites back.

    I am curious why the new AFPS task wasn't handed to the AFPRB. After all, the excuse that the MPs have used for their trough-busting increases is that they were recommended by the Senior Salaries Review Board. What did our AFPRB have to say on the new scheme and, were they in fact consulted?

    Food for thought...MP gets a pension of 13K after 10 years. It will take us 35 years to get that under the new scheme!