AFPS75 rules changed - less cash received, more tax paid

Discussion in 'The Quarterdeck' started by geoffrey, Sep 9, 2007.

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  1. As slipped out during a quiet August - did anyone else notice 2007DIN01-018, halving the AFPS75 maximum commutation from 50% to 25%, with effect from all service accrued since 2006? This is awful news - commutation money is tax-free, whereas the income that it replaces is taxable, so looks like another stealth tax, and one that only affects ex-Armed Forces with a job after going outside (99% of other pension schemes don't allow commutation until 65, so income tax liability minimised).

    This seems to be a huge change in the T&Cs of serving personnel, despite the fact that we were promised no change in the AFPS75 terms, and the DIN also says that although it comes from the Finance Act 2004 (ie the year before AFPS 05), no one is allowed to revisit their decision to transfer and yah-boo-sucks to the lot of you.

    It looks to me that the MoD didn't notice the change in the law when it was introduced (remember this was decided by parliament a year before the OTT went out), have now realised it, and are sticking 2 fingers up to all of us on AFPS75 by not allowing any revisiting of the Offer to Transfer. After all, the OTT paper we all got had the figures based on 50% commutation.

    If you think how many people leave after 16 years, then get a job with an average salary, so the pension income may well push the tax bracket to 40%, this increases the income tax take from service pensioners by a massive amount. I'm scandalised. What can we do? I've looked on ARRSE and RR but can't find anyone who's noticed....
  2. Can BAFF or whatever it is called not help you with this disgrace? Can they change your terms and conditions without your consent? I think you`ve struck a hotty there, good luck with it.
  3. Just noticed the ARRSE thread as well, and one thing that occurs to me is that as the commutation is technically "resettlement commutation", this really stitches people up when they need the money (that they were promised by AFPAA on the OTT paperwork) for .... er ... resettlement.

    This is a disgrace. Time to join the Forces Pension Society, methinks!
  4. i was led to believe that 25% was the maximum amount commutatable by tax laws. it certainly is the case in the LAFB. there has been rumours that this may be eligible for tax in the near future. OP fresco 2 anyone?
  5. Re: AFPS75 rules changed - less cash received, more tax pai

    Commuting an amount of your pension when you leave the RN has always been an option however you have to pay it back by recieving a reduced
    pension amount untill you are age 55 years.
    Amount granted as commuted is deducted from the years remaining prior to you reaching 55. [ie leave at age 40 ---you have 15 years of a reduced pension ] Pension payments do recieve increases prior to index linking at age 55 so its a handy little income[mine paid my mortguage and council tax]

    Your RN pension will always be taxed at source at base rate due to the fact that it is classed as unearned income. Especially when you are earning a wage/salary and paying tax under PAYE rules.
    Tax at the higher bracket for wage / salary earnings will be applied if you
    get into that pay scale.

    Commuting yes but the resettlement grant is usually adequate so unless you can guarantee a steady wage for the future its sometimes better to have the pension amount at a handy amount each month. Put it into a high interest savings account!!

    :nemo: :nemo:
  6. Re: AFPS75 rules changed - less cash received, more tax pai

    After much searching, I've just managed to get hold of the DIN and noticed para 3a.

    Before the Finance Act was applied, you could apply for commutation up to 12 months after leaving. However, to commute the element of service accrued after 6 Apr 06, the application now needs to be made before leaving the Forces.

    Best I complete another AFPAA Form 1 then!

    I notice that the DIN hasn't been widely publicised though.
  7. fwiw when I went through the release office in the spring they did stick a form in front of me for commutation or otherwise.

    Along with a whole host of other paperwork, on what was quite a difficult day.
  8. Re: AFPS75 rules changed - less cash received, more tax pai

    To be honest, for those of us in our last job it isn't going to make a massive dent, but it will hit those who have only been in a short while and who stayed with AFPS75.

    I reckon it's a punishment for not going with the all new, shiny, cost saving AFPS05, so they're clawing it back by reducing commutation (there I go being cynical again).

    Edited to add: it's the way it's happening that is the stinker, especially for those who stayed with AFPS75 on the strength of an incorrect Pensions Calculator when MOD knew that FA2004 will have an impact.

    The Forces Pension Society know about it and will update their info when they get the official figures from MOD.
  9. So what they are saying is that when I leave I can have a commutation up to 50% on my pension earned before Apr 06 and only 25% after that date?

    Are we only entitled to one or the other or both?

    My TX date is APR 09 and am on AFPS75, I'm confused and I'm in Iraq and I don't know if I can get any info out here!!!
  10. Re: AFPS75 rules changed - less cash received, more tax pai

    The way I read the official blurb from the MOD site:

    is that you can still apply to commute the pension from your service before 2006 up to 12 months after leaving.

    However, to commute that pension you built up after 2006, you need to apply before leaving or you'll only be able to commute pension you built up before 2006.

    It may be worth e-mailing AFPAA for a quote before you leave, and take advice from an Independent Financial Advisor.

    MOD Pensions Link
  11. Re: AFPS75 rules changed - less cash received, more tax pai

    ????? Been recieving my pension for 7 years - it hasn't increased.
  12. Re: AFPS75 rules changed - less cash received, more tax pai

    I've just found out today, it was published quietly on the back page of the "Sentinel" (our weekly orders). It's a fcuking outrage! Anyone like me on AFPS 75 with a third or more of their time to do need to seriously re-evaluate how much of a lump sum they're gonna get. I'm gonna be about 10 grand down on mine. Yeah, I'll have a bigger monthly pension but the point is - I didn't want one. It'll be interesting to work out exactly how much tax I'll be paying on that "tax-free" 10 grand I'll be missing out on...

    Fcuked if I'll be voting for Brown. Cnut.
  13. Re: AFPS75 rules changed - less cash received, more tax pai

    I was under the impression that it stayed static for 15 years then was index linked to the (then) pension rate ? But I could be mistaken on this - probably duff info ... !!
  14. Re: AFPS75 rules changed - less cash received, more tax pai

    Thats exactly what I've been told aswell, the pension increases when you reach 55 I think, could be wrong though.
  15. Re: AFPS75 rules changed - less cash received, more tax pai

    I'd have to dig out the paperwork, but as I recall it stays static until age 55 then steps up to reflect index linking over the period it's been payed, and is then index linked thereafter. Which index it's linked to I'm not sure.
  16. Re: AFPS75 rules changed - less cash received, more tax pai

    So the pension increases at age 55, if for example you'd left age 40 then you would have 15 years inflation (index link?) heaped onto it in one go?
  17. Re: AFPS75 rules changed - less cash received, more tax pai

    Actually no, I was wrong. If one commutes the pension then at 55 it jumps back to the full amount, and is then index linked. I commuted the full amount possible so mine will jump significantly, and then start to rise with inflation.

    Mind you, I'm not confident of the real value so my service pension is currently piled into amy occupational pension and a couple of other investment vehicles that I had.
  18. Re: AFPS75 rules changed - less cash received, more tax pai

    This really did slip under the summer leave radar didnt it! by not allowing us to re-visit the OTT now that we have the correct information, if not the correct pension calculator, is disgraceful, not much we can do i suppose just like when we get our "inflation busting!" payrise. if you really want a laugh feel free to pass on your frustration at your next Divisional meeting "what do you mean you dont have them.." they are supposed to be a 2-way chat not just sit down and have a well scrubbed 21yr old cabin boy read the latest galaxy brief to you, or for the really brave next time a flag officer gets wheeled out of the Leech carehome for the seriously out-of-touch, dont just smile sweetly when he asks how long you have been in and what the is food like, ask the twat why we were not told about this 2 yrs ago and watch as his nurses (sorry, Cdrs) put the oxygen mask back on whilst moving him to a more suitable conversation on new carriers or the navy rugby team, bastards!!!!! not all of you out there are scum at the bottom of the pond, look at your shoulder next time your in the bar at lunchtime and ask yourself is there no-one or nothing you can do to to change things
  19. Re: AFPS75 rules changed - less cash received, more tax pai

    That sums it up , I left in 95 and it has stayed the same since then , 2 & 1/2 years to go for the indexed link to kick in . fxxxxxxxxxg roll on .

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