Index linked pension

Ivrytwr3

I have a question regarding UK Military Pensions.

After 22 years service you are eligible for an immediate pension. This is a frozen amount until age 55 when it then becomes index linked for the duration.

So, if today is the day you turned 55 and your pension has become index linked, what would your monthly pension rise to?

Based on your immediate pension being £9399.

Bright_New_Dawn

Depends on the index it is linked to....

CPI
RPI
NAEI

An index linked pension is a hedge against inflation -The point is that the spending power of your money is not eroded by inflation, assuming it works properly!, so there should be no increase in value.

For example if it were linked to the retail price index (RPI) and RPI was 0 or negative you would probably not get any increase that year.

Having said this an index is not applicable to everyone and therefore there will be winners and losers. Unfortunately the general consensus is that inflation at the moment is higher for pensioners than younger people and therefore the rises might not truely reflect the increased cost in living.

Ivrytwr3

Ah! Thanks. It is linked to RPI (i believe!)

MikeJones_2

Hi Ivrytwr3,

Ivrytwr3 wrote: »

So, if today is the day you turned 55 and your pension has become index linked, what would your monthly pension rise to? Based on your immediate pension being £9399.

Most public sector pension schemes use RPI as the index for pension increases awarded to pensions in payment. (See: Retail Price Inflation)

What increase you will receive will be determind in the Scheme Rules.

For example, some public sector pension schemes use the RPI figure to the year ending September - but the award is granted to the pension in the following April.

September 2009 RPI figure was -1.4% (it was actually deflation as prices fell).

It is possible therefore, that there will be no increase awarded from next April 2010 to pensions in payment for schemes that use the September index figure, although I have as yet not read this anywhere.

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

Ivrytwr3

thanks for the link; very useful!

sleepless_saver

Ivrytwr3 wrote: »

I have a question regarding UK Military Pensions.

After 22 years service you are eligible for an immediate pension. This is a frozen amount until age 55 when it then becomes index linked for the duration.

So, if today is the day you turned 55 and your pension has become index linked, what would your monthly pension rise to?

Based on your immediate pension being £9399.

Is the £9399 the value at the end of the 22 years service or at the date wqhen you turn 55? If I've understood your question properly, the level of ension at 55 depends on the RPI in the years between the end of the 22 years service and turning 55.
This is on the assumption (depending on your scheme rules) that the pension isn't actually frozen for those years, it is increasing with the RPI, but you don't get the benefit of that until you actually claim it.

Ivrytwr3

£9399 is payable after 22 years service.

At age 55 your £9399 then rises with RPI.

molerat

Mine was £5887 (£4650 payable after commutation) in 1994 and £9052 in 2009 as an illustration. I used a simple excel spreadsheet to plan ahead and set the rate at 2% pa correcting it each year, you get the figure on the annual pension newsletter.

The full pension at 22 years is notionally increased by the RPI increase until fully payable at age 55.

Andy_L

Ivrytwr3 wrote: »

I have a question regarding UK Military Pensions.

After 22 years service you are eligible for an immediate pension. This is a frozen amount until age 55 when it then becomes index linked for the duration.

So, if today is the day you turned 55 and your pension has become index linked, what would your monthly pension rise to?

Based on your immediate pension being £9399.

at 55 you also receive the back-dated RPI indexation so we need to know how long ago your received the immediate pension

Ivrytwr3

Hee hee, haven't received it yet. I just overheard a conversation the other day and someone mentioned that at 55 it significantly increased. Although neither could quote figures, nor could i find any figures on the t'net. Ibased the figures around my forecasted pension.

In 6 years time i am eligible for the immediate pension (current rate and rank puts that at £9399). 13 years later i will be 55 and was curious what COULD the difference between the immediate and index linked one.

As we don't have crystal balls, i asked based on todays rates.

Make sense or clear as mud?! lol!

Thanks.

zygurat789

Does it really matter. It will buy you £9399 (at todays prices) worth of whatever when you are 55. You will be no better off.