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Commutation of Army Pension - Is it worth it?

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  • If a serviceman is made redundant after say 20 years (age 38) and get a pension adn takes resettlement commutation, then this would be paid under the 15 year rule when he/she is 53. Is that deduction then restored at that point OR do they have to wai till age 55. A friend did that and this month was expecting to have the commutaion reduction restored but the SPVA pensions tema have told him he continues with the deducation until age 55. That cannot be right? Any ideas where I can find the rules online. I was Pers Admin in the RAF and am sure SPVA are wrong.
  • edited 18 February 2011 at 3:28PM
    moleratmolerat Forumite
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    edited 18 February 2011 at 3:28PM
    What is the "15 year rule" ? It is and always has been age 55, the age when a "full career pension" is payable.
    If you leave the Armed Forces before reaching the
    age of 55 and with an entitlement to an IP, other
    than invaliding benefits, you may apply for
    resettlement commutation. The Finance Act 2004
    (FA 2004) stipulates that a member’s pension
    may not reduce from one year to the next except in
    exceptional prescribed circumstances.
    Rights to commutation in respect of pension
    earned before 6 April 2006, when the provisions
    of FA 2004 came into force, are unchanged, you
    need to apply no later than 12 months after
    leaving the service but, for pension in respect of
    service after that date the commutation decision
    must be made before the pension comes into
    payment. To maximise the amount of resettlement
    commutation you can receive you need to apply
    before leaving the Services otherwise only service
    before 6 April 2006 can be commuted.
    There will be a compensating reduction in your
    pension, which will be restored to its original value
    at the age of 55. There can be no restoration of
    your pension to its original value before this time.

    Once the completed application from has been
    forwarded to SPVA Pension Division, and they
    have processed it, the decision is final and
    cannot be reversed.
  • moleratmolerat Forumite
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    Steveswift wrote: »
    After doing a bit more reading and trying to get a more accurate figure to my likely final pension amount,i have hit a wall can you help. Am i reading it right that if you served a full 37 years ( 18-55) one would recieve 48.5 % of your final salary as a final pensionable amount. As i left at the 18 year point under Voluntary redundacy that i would receive 18/22 of the 37 year full career amount ?

    Have i got that right?

    Thanks in advance, i will check in a little more often :)

    Steve
    I don't think it is that simple
    YOUR ACCRUED BENEFITS

    Your accrued benefits do not build up at a
    uniform rate. AFPS 75 accrual rates are faster up
    to the IP Point, so that after 16 years’ reckonable
    service as an Officer you will have accrued
    28.5% of representative pay, and after 22
    years’ reckonable service as an Other Rank, you
    will have accrued 32% of representative pay. If you
    retire at age 55, with 34 years’ reckonable service
    as an Officer or 37 years’ reckonable service as
    an Other Rank, you will have accrued the
    maximum pension of 48.5% of representative pay
    (the 48.5% excludes the terminal grant).
  • Hi guys. I'm an ex WO1 and my commuted pension is currently around £620 pcm. Could anybody advise what it will be when I reach 55 in 7 years time? Very rough figures will be fine i.e. roughly double?
  • moleratmolerat Forumite
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    A good ballpark figure is roughly double the 22yr/age 40 fully commuted pension, obviously less if you came out after age 40. I set up a spreadsheet for mine and input the inflation data, it came out £16 pa wrong after 15 years.
  • telboyotelboyo Forumite
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    molerat wrote: »
    A good ballpark figure is roughly double the 22yr/age 40 fully commuted pension, obviously less if you came out after age 40. I set up a spreadsheet for mine and input the inflation data, it came out £16 pa wrong after 15 years.

    Molerat
    Any chnce you could post a copy of the spreadsheet witg the relevant RPI figures and formulas?
  • moonrakerzmoonrakerz Forumite
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    molerat wrote: »
    A good ballpark figure is roughly double the 22yr/age 40 fully commuted pension, obviously less if you came out after age 40. I set up a spreadsheet for mine and input the inflation data, it came out £16 pa wrong after 15 years.


    That is fairly accurate at present but would not have been back in the 70s with 20%+ inflation !!

    I have just dug out my tablets of stone and my figs were:

    Pension at 40 (Gross) £3811
    With commutation £3014
    At age 55 £7622
    At age 65 (V Soon !) £9121
  • I had transfered my army pension to a civilian pension years ago and since it was so long ago, i am having no luck in finding which company my policy is now with...(lost the paperwork whilst moving).
    I have asked the DOWP to try tracing this said pension but was wondering if anyone out there has any other information or help they can give me which would help?

    fockers.
  • iansmumiansmum Forumite
    69 Posts
    I have read this thread with interest as my OH is about to receive his increased pension at age 55. He has had his 55th birthday and the first increased payment should be at the end of April. We had the letter asking about other pensions and sent that straight back but when can we expect to hear about what increase he will get? There's a new car depending on it!!
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