Old Pension v New Pension

[busby1971]

Just doing a few sums as I come to the end of my time and about to take on a new mortgage (new house) so worked out what pension and lump sum I'd be getting.

Then I thought that now I'm on Admin Wages I'd check what I'd get under the new scheme, I must admit it had gone up quite a bit but still over an average life time (I guess about 70 for me) I would be over 30 grand out of pocket. At Age 55 I be 50 grand out of pocket just when I'd be best placed to enjoy the extra income.

In fact to start benefitting I need to be 101 years and 5 months old, which with a history of senility in the family line I think I'll be in a home by then.

So apart from the relatives of the dead who does benefit from this new (cost neutral) Scheme?

 

[4everAD]

I still can't get my head around the 18 years service and at least 40 years old bit to qualify for an immediate pension under the new scheme. What happens if you join at 16 then serve 18 years? I.E aged 34 with the required years of service compared to someone who joins at age 22 say who does 18 etc.

 

[firestorm]

Who benefits?
The government!
When they changed our scheme for new entrants they tried to persuade us on the old scheme to transfer over too. Unfortunately the document sent out contained a direct comparison between the 2 schemes.
Although I'd have to pay less per month (6-8% into the scheme as opposed to my current 11%) I'd have to work much longer for less benefits!

I decided not to change.

 

[dixieblues]

I still can't get my head around the 18 years service and at least 40 years old bit to qualify for an immediate pension under the new scheme. What happens if you join at 16 then serve 18 years? I.E aged 34 with the required years of service compared to someone who joins at age 22 say who does 18 etc.

I'm on the old scheme and I joined at 16 and my pensionable service did not start until my 18th birthday, now been in 23 yrs and my 22 yr service in not recognised until next year. So you join aged 16 and actually have to do 20yrs for your pension. You may have heard of people talking about 18 months for the Queen, that's the bit you have basically done for free.

I don't know the new pension, so it might be slightly different, just letting you know what it's like for me.

 

[Realist78]

I think your sums might be a bit suspect Busby. I went through the whole spreadsheet thing when the offer to change came about and my (and others) reckoning is that you will start benefitting from the new scheme if you're still in at age 49 ish (serving from your teens) and crucially, you leave before age 55. The only challenge left is to avoid the Government sponsored sniper who wants to take you out before you claim the second lump sum at age 65.DT_Xtremez_19:

 

[busby1971]

So not many people then.

So not many people then.

I think your sums might be a bit suspect Busby. I went through the whole spreadsheet thing when the offer to change came about and my (and others) reckoning is that you will start benefitting from the new scheme if you're still in at age 49 ish (serving from your teens) and crucially, you leave before age 55. The only challenge left is to avoid the Government sponsored sniper who wants to take you out before you claim the second lump sum at age 65.DT_Xtremez_19:

No my sums were fine, but you are saying that you have to be aged 49 and over and have started in your teens, this knocks out most people Sgt and Below, so the only people to benefit are FS and above so far.

I thought moving onto high band would have a bigger impact, which is why I worked it out.

Pension Comparator
Following Figures were taken from the Pension Calculator 23 Dec 09.
JNCO High band Leaving in Apr 2011, Joined Jan 1989
I've added 2% compounded for 2 years to all figures as a best guess of possible pay rises
This won't effect the outcome of a pure comparason but the differences will be bigger over time if Inflation was included.

AFPS 75 AFPS 05
Immediate Pension (IP) 9398 5379 EDP @ 40
Terminal Grant 29333 32273 Lump Sum
Reduced IP 7940 8068 EDP @ 55
Full Computation 15356 10758 Preserved Pension at 65
IP @ 55 9778 32273 Pension Lump Sum

I've decided to fully commute (taking into account inflation would just make the situation worse)
Difference Running Total
Payments at 40 44689 32273 12416
Age 40 7940 5379 14977
41 7940 5379 17538
42 7940 5379 20099
43 7940 5379 22660
44 7940 5379 25221
45 7940 5379 27782
46 7940 5379 30343
47 7940 5379 32904
48 7940 5379 35465
49 7940 5379 38026
50 7940 5379 40587
51 7940 5379 43148
52 7940 5379 45709
53 7940 5379 48270
54 7940 5379 50831
55 9778 8068 52541
56 9778 8068 54251
57 9778 8068 55961
58 9778 8068 57671
59 9778 8068 59381
60 9778 8068 61091
61 9778 8068 62801
62 9778 8068 64511
63 9778 8068 66221
64 9778 8068 67931
65 9778 10758 66951
Lump Sum @ 65 32273 34678
66 9778 10758 33698
67 9778 10758 32718
68 9778 10758 31738
69 9778 10758 30758
70 9778 10758 29778
71 9778 10758 28798
72 9778 10758 27818
73 9778 10758 26838
74 9778 10758 25858
75 9778 10758 24878
76 9778 10758 23898
77 9778 10758 22918
78 9778 10758 21938
79 9778 10758 20958
80 9778 10758 19978
81 9778 10758 18998
82 9778 10758 18018
83 9778 10758 17038
84 9778 10758 16058
85 9778 10758 15078
86 9778 10758 14098
87 9778 10758 13118
88 9778 10758 12138
89 9778 10758 11158
90 9778 10758 10178
91 9778 10758 9198
92 9778 10758 8218
93 9778 10758 7238
94 9778 10758 6258
95 9778 10758 5278
96 9778 10758 4298
97 9778 10758 3318
98 9778 10758 2338
99 9778 10758 1358
100 9778 10758 378
101 9778 10758 -602
102 9778 10758 -1582

Appols for the tabulation.

 

[Goatherdingsplitter]

From my calculations, it is critical for me to do the full stretch as I transferred to APS 05, but as pointed out earlier this makes it only viable to those with the potential to make FS, I would have been considerably worse off on APS 75. Leaving just a few months short of full service would have made a huge impact on my annual pension, but does provide another tax free payout at 65. In my case this would still leave me worse off, however, for anyone leaving for full time employment, it is probably worth it for the tax saving.

 

[Hu Jardon]

Like GHS said the people who gain Big Time from the new scheme are those who stay in till Age 55, in fact you have to stay in till you are 55 to get the "Pension". Anyone on Pension 05 who leaves before the age of 55 gets a Lump Sum and a monthly Early Departure Payment (EDP) they get incremental EDP rises at certain age points and another lump sum at age 65. On the new scheme you only get one lump sum but your monthly pension payment is much bigger than monthly EDP. If you joined before you were 18 then this time counts on the new scheme.

In my case I have done my 55 and joined when I was 16 so I am over £8K a year better of on the new scheme compared to the old scheme and my lump sum was 3 times my pension so was £25K more - which was nice

 

[4everAD]

I'm on the old scheme and I joined at 16 and my pensionable service did not start until my 18th birthday, now been in 23 yrs and my 22 yr service in not recognised until next year. So you join aged 16 and actually have to do 20yrs for your pension. You may have heard of people talking about 18 months for the Queen, that's the bit you have basically done for free.

I don't know the new pension, so it might be slightly different, just letting you know what it's like for me.

Yes I understand about doing time for the Queen (Did a whole 6 weeks myself) however on new scheme all service counts not just from 18 so my initial query still stands how does a 16yo qualify if they only do 18 years? Because even if they do 22 years they'll still only be 38 ish on leaving, so not meeting the requirement. Is this the underhand cost saving measure we all thought it was, i.e. join under 18yo and unless you get to Sgt (To sign on for the extra years you need) you don't qualify for any money till you hit 65??????????????

 

[busby1971]

Now there's something

Now there's something

Yes I understand about doing time for the Queen (Did a whole 6 weeks myself) however on new scheme all service counts not just from 18 so my initial query still stands how does a 16yo qualify if they only do 18 years? Because even if they do 22 years they'll still only be 38 ish on leaving, so not meeting the requirement. Is this the underhand cost saving measure we all thought it was, i.e. join under 18yo and unless you get to Sgt (To sign on for the extra years you need) you don't qualify for any money till you hit 65??????????????

A lot of kids have joined on the new scheme and a fair few of them have been 16 or 17 years old, in the old days when you signed on your 9 years or whatever did not start until your 18th birthday so promotion to Cpl and the acceptance of a 22yr engagement automatically results in a pension, as long as you don't fail your fitness test.

4EAD points out that is another group who may miss out on quite a massive amount of dosh, unless they are offered continuance to complete to age 40, this new scheme appears to have a lot more losers than winners in the RAF, the army now have a 24 year engagement that appears to clear this hurdle.

Appols for grammer

 

[4everAD]

A lot of kids have joined on the new scheme and a fair few of them have been 16 or 17 years old, in the old days when you signed on your 9 years or whatever did not start until your 18th birthday so promotion to Cpl and the acceptance of a 22yr engagement automatically results in a pension, as long as you don't fail your fitness test.

4EAD points out that is another group who may miss out on quite a massive amount of dosh, unless they are offered continuance to complete to age 40, this new scheme appears to have a lot more losers than winners in the RAF, the army now have a 24 year engagement that appears to clear this hurdle.

Appols for grammer

Nail, head. I can't be the first person to have worked this out? (I'm not that bright) I just can't see the RAF signing people on to "Help" them out. We're going to have to go to the 24 year engagement or there will be a long queue at many solicitors offices. Were "They" hoping no-one would notice?

 

[4everAD]

Ok, in a bored moment I put the figures into the Pension calculator and indeed it is quite shockng.

A Cpl retiring after 22 years service on AFPS 05 but was under 18 years old on enlistment gets £10,000 resettlement grant (Same as someone doing 12 years) and NOTHING else till 65 years old.

However an identical Cpl who serves 22 years but was 18 or older on enlistment gets the whole hog i.e EDP and immediate pension.

Now I know where the massive savings came from to pay all those FS's and WO's their huge increases when they swapped across!

PS. I wonder just how many of our younger servicemen/women understand the implications of the above? Will most just asume that doing the 18 years service will be enough?

 

[FootTapper]

When the new pension came in, and I had the option to change, I had a look at the two, ran the numbers for 22 years service and thought "Sod changing, it's a scam"


Then I had a think about what I was likely to do, would I serve 22 years and then leave? If I got out a day before my 22 year point (or a year, or 5) I'd get screwed on '75 compared to '05 - the '05 preserved pension is massively better.

I was gambling that if I stick out 22 years in the RAF, I'm probably going to want to sign on and stay in for longer (on the basis that I would have my third by the time I've done 22) If, with 5 years or so to go before my 22, I don't think I'm gonna get my third then I'd be better to cut and run in my mid 30s to look for other employment rather than drag it out and get 5 years less in the new career.


I worked out, for me, that 22-29 years service and the old pension was better overall.
<22 years service and the new pension is *a lot* better
>29 years service and the new pension is better.

 

[Teh Wal]

I think your sums might be a bit suspect Busby. I went through the whole spreadsheet thing when the offer to change came about and my (and others) reckoning is that you will start benefitting from the new scheme if you're still in at age 49 ish (serving from your teens) and crucially, you leave before age 55. The only challenge left is to avoid the Government sponsored sniper who wants to take you out before you claim the second lump sum at age 65.DT_Xtremez_19:

I tend to agree with Realist (to a certain degree) as i did the spreadsheet thing too (over 2 -3 days). However I realised at the time, and pointed out to many other people, that it appeared to be a very individual decision to take and you could not base your future financial plans on what the bloke stood next to you decided to do. I dunno about the age 49 observation BUT as I mentioned it depends very much on individual circumstances.

I still have the spreadsheet if anyone wants it. However with the opportunity to move across to the 05 pension scheme now long gone then all you're gonna do is kick yourself if you found you made the wrong move.

I moved across to 05 based purely on the fact that following 26 years service and leaving as a Sgt (at the time) I would achive "parity" at age 65 (ish). In fact according to my calculations I will be about 6 grand up in total (EDPs plus both lump sums) but that is without taking into account that the final lump sum will be greater than the initial (first) lump sum plus other factors knocking up both AFPS75 and 05 figures.

I actually left after 28 years service as a C/T in mar '08. The 1st lump sum (picked up back in Apr 2008) will help me out massively in November this year (invested) when my mortgage is up for renewal. I can live with the EDPs until age 55 (when my EDPs will go up to 75% of my FP) and again at age 65 when I will get the 2nd lump sum plus I will start to recieve the full final pension... which will be about 2 1/2 to 3 thousand a year more (as it stood at the time) than the FP awarded under the AFPS75 scheme. My personal view is that my family is historically long-lived (80+ is not unusual DT_Xtremez_19; I needed the larger lump sum at the time (now); a large lump sum at 65 might come in handy; a big pension (larger than FP decided at age 55) at 65+ will be nice.

As I said it all depended very much on personal circumstances so there was no point in basing your choice of pension scheme on what Bob in the corner of the tea-bar decided was good or bad!

 

[The Masked Geek]

Lump Sum @ 65 32273 34678

You don't get a second lump sum at 65 on AFPS 75.

 

[busby1971]

Yes I know

Yes I know

You don't get a second lump sum at 65 on AFPS 75.

Yes that's why I took it off the difference.

 

[Realist78]

A lot of kids have joined on the new scheme and a fair few of them have been 16 or 17 years old, in the old days when you signed on your 9 years or whatever did not start until your 18th birthday so promotion to Cpl and the acceptance of a 22yr engagement automatically results in a pension, as long as you don't fail your fitness test.

4EAD points out that is another group who may miss out on quite a massive amount of dosh, unless they are offered continuance to complete to age 40, this new scheme appears to have a lot more losers than winners in the RAF, the army now have a 24 year engagement that appears to clear this hurdle.

Appols for grammer

Whereabouts is this detailed?

 

[busby1971]

Side swipe

Side swipe

Whereabouts is this detailed?

This was toungue in cheek, as fitness levels get ever and ever tougher, and the consequences ever graver (unless you develop a glass back)

 

[Soon To Leave]

I moved across to 05 based purely on the fact that following 26 years service and leaving as a Sgt (at the time) I would achive "parity" at age 65 (ish). In fact according to my calculations I will be about 6 grand up in total (EDPs plus both lump sums) but that is without taking into account that the final lump sum will be greater than the initial (first) lump sum plus other factors knocking up both AFPS75 and 05 figures.

Are you sure the 2nd lump is bigger? I always thought it was identical to the first.

 

[Realist78]

Are you sure the 2nd lump is bigger? I always thought it was identical to the first.

There's index lionking to take into account.