Warning: SPVA having problems calculating Resettlement Commutation

Discussion in 'Armed Forces Pension Scheme' started by RCEME, Jun 12, 2011.

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  1. I'm pretty sure this problem only applies to AFPS75 members who left the service with an Immediate Pension after Apr 2010 and who elected to take Resettlement Commutation. No need to read on if that's not you........

    In Layman's terms, when you elect to take Resettlement Commutation you're awarded the lump sum you would have got if you'd done a full 37-year career. Think of it as a tax-free loan really, because you are being loaned the difference between your standard lump sum and a 37-year career lump sum. Obviously this loan needs to be paid back, with interest, and it's done so by reducing the annual pension you receive until age 55.......herein lies the problem. In order to work out the amount of extra interest on the loan, the SPVA use a fairly simplistic set formula and a table of Resettlement Commutation Rates.

    The Resettlement Commutation Rates are normally fairly static, but they were updated in Apr 2010 and the new rates mean that the interest that needs to be paid back has been reduced. That's the good news...........the bad news is that the SPVA are having 'technical problems' and therefore their calculator is still churning out calculations based on the previous (outdated) rates. Funnily enough, they make no mention off this problem when they send out your Pension Award Letter.

    Fortunately, we're not talking massive figures here, in my case I'm being deducted about £31/month more than I should be. This post is more a gypsy's warning to be aware of to ensure that when the SPVA finally do get their system sorted you can check that you start getting paid the correct amount. The SPVAs party line is that once the system's sorted then everyone will get back what they're owed so nobody will be out of pocket, however, the 'target date' for fixing the problem isn't until Sep 2011, which means there could be some out there who've been underpaid (overcharged) for 18-months.

    One last ironic point to end with, fortunately, the Armed Forces Pension Calculator (AFPC) has been updated, so you should get an accurate calculation from there. You can also get an accurate forecast if you're a member of the Forces Pension Society......in fact, the only place you probably won't get an accurate figure is the SPVA, which unfortunately is the agency empowered to calculate and award you your pension.

    Whether the SPVA will offer compensation for the 'loss of interest' on the money that they now owe everyone remains to be seen.......