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Third option on pensions

#1
I heard a tale that there is currently a trial on a third option on your mil pension.

Apparently the idea is your assessed on how long you'd live, then how much you'd get in pension payments. Then if you decide to, you can take one lump sum pay off. Its a gamble, you could be hit by a bus the day after you get the dosh or you could live ten years longer than you were assesed to.

If this is true, is the lump sum taxed? If you are not claiming a mil pension would you then be able to get a full civvi pension at retirement age, oh and all the other benefits you can't claim seeing how you served your country, paid NI and tax all your working life etc etc, when spineless shiftless gits who have done sod all but sponge off the state can?
 
#4
Manic_mechanic said:
I heard a tale that there is currently a trial on a third option on your mil pension.

Apparently the idea is your assessed on how long you'd live, then how much you'd get in pension payments. Then if you decide to, you can take one lump sum pay off. Its a gamble, you could be hit by a bus the day after you get the dosh or you could live ten years longer than you were assesed to.

If this is true, is the lump sum taxed? If you are not claiming a mil pension would you then be able to get a full civvi pension at retirement age, oh and all the other benefits you can't claim seeing how you served your country, paid NI and tax all your working life etc etc, when spineless shiftless gits who have done sod all but sponge off the state can?
As I understand it the max tax free lump sum for any pension is 25% of the value of your benefits to an overall max of 25% of the lifetime allowance for pensions.

It used to be best to commute as much as possible because the lump sum was tax free whereas the annual pension was taxed. I am not a Financial Advisor though, and it goes without saying that you shouldn't take financial advice from a stranger on the internet anyway. (Having said that a few people have thanked me for telling them not to transfer their Army (Govt backed) pensions into civi pension schemes when they left in the 90's!)
 
#5
Manic_mechanic said:
I heard a tale that there is currently a trial on a third option on your mil pension.

Apparently the idea is your assessed on how long you'd live, then how much you'd get in pension payments. Then if you decide to, you can take one lump sum pay off. Its a gamble, you could be hit by a bus the day after you get the dosh or you could live ten years longer than you were assesed to.

If this is true, is the lump sum taxed? If you are not claiming a mil pension would you then be able to get a full civvi pension at retirement age, oh and all the other benefits you can't claim seeing how you served your country, paid NI and tax all your working life etc etc, when spineless shiftless gits who have done sod all but sponge off the state can?
I've never heard of it for either the 1975 or the 2005 pension. Some pensions can be commuted into cash under certain circumstances, but I thought the military pension was inflexible in that respect.

Once you have completed sufficient service, you are eligible for a taxed monthly pension, plus a tax-free lump sum of 3* the annual pension. Under the 1975 pension, you can commute some of that pension into cash. Under the 2005 pension, you can't.

At the age of 60 or 65, you are eligible to draw the Old Age pension. Again, it is taxable.

If your income in your dotage is less than the minimum, then you may be able to draw pension credits, housing benefits etc.

Litotes
 
#8
I think someone is spinning you a line. For what you suggest to happen would require a change in UK law as any lump sum from a pension must not exceed 25% of the total value of benefits vested. To also suggest that is is 'being trialled for a few individuals' does not sound correct either.
 
#9
Manic_mechanic said:
Apparently its being revived, as I said its being trailed for a few individuals. At least one WO2 has recently accepted the offer.
I think i't being trialled on a busload of nurses from munster!!

PW
 
#13
This one of the options that was being looked at when the review took place which resulted in AFPS 05, as LJS said this option was discounted as being far too expensive. There is no way under the sun they would trial an idea like this with a few selected individuals. I suggest your sources are not being entirely honest with you MM.

The photocopier engineer was only telling me yesterday of his mate in the TA who is really Regular SAS working undercover with the TA, used to be the RSM there but now the CO, flies helicopters "sometimes" and has been on all the missions you could think of in the past 10 years that "may have involved SF" - maybe he is related to someone involved in the "trial"

PW
 

Sixty

ADC
Moderator
Book Reviewer
#14
Bonzo_Dog said:
For what you suggest to happen would require a change in UK law as any lump sum from a pension must not exceed 25% of the total value of benefits vested. .
That's not true. If an individual has an entitlement pre A-Day to greater than 25% then it can be protected so that the Pension Commencement Lump Sum is higher than the standard 25% on benefit crystallisation.

Can't think it would apply to many (any?) in the Army scheme though.
 
#15
Prince_Rupert said:
Bonzo_Dog said:
For what you suggest to happen would require a change in UK law as any lump sum from a pension must not exceed 25% of the total value of benefits vested. .
That's not true. If an individual has an entitlement pre A-Day to greater than 25% then it can be protected so that the Pension Commencement Lump Sum is higher than the standard 25% on benefit crystallisation.

Can't think it would apply to many (any?) in the Army scheme though.
As I understand it (and I may be wrong), the only benefit crystallisation event that would apply to Army personnel would be when that individual becomes entitled to an immediate pension, the others (such as the individual reaching the age of 75 or movement of money held in a scheme) just don't apply to personnel that receive an immediate pension and therefore able to commute part of it. In that case, the crystalised amount would be 20 times the pension payable to the individual in the first year - and this triggers the 25% lifetime allowance for commutation. The Inland Revenue and the scheme administrator may agree a higher valuation factor than 20 but for military pensions this is extremely unlikely. For there to be a fundemental change in how pensions are paid (taking into account crystallisation events) as suggested by Manic Mechanic would need a change to the Finance Act 2004.

Now I am a total amateur when it comes to pensions so, if I am way off the mark, I am sure someone will put me right.
 

Sixty

ADC
Moderator
Book Reviewer
#16
No, you're probably quite correct. I'm TA so consequently know the square root of sod all about the Armed Forces Scheme and it's rules. I was speaking generally rather than specifically which was why I wrote that I didn't see the protection rules applying.

Apologies for confusion.
 

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