Commutation of Army Pension - Is it worth it?

molerat

From experience you will probably be informed after you have received the first payment , I have not received this years payment info and have already had my first 12-13 pay Without actual figures it is hard to say what he will get but assuming he left after 22 at age 40 the gross pension will be (very!!) roughly 1.5 times the un-commuted amount or if he took full commutation then 2 times the commuted amount.

System

iansmum wrote: »

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!!

I was 55 at the end of March. I received my revised figures with my P60 from Xaffinity yesterday

iansmum

Thanks very much to both of you for your replies. I can stop watching for the postman now! He was 55 in early April so the first revised payment will be at the end of the month I think. I admit I don't really understand all this but I assume he took full commutation so that means double what he gets now.
When you get the letter does it give you the net amount after tax? Is there anything we need to be aware of regarding the tax as a couple of people have said you have to deal with two tax offices?

System

My pension is taxed BR. The notification gives you the gross and net amounts. My pension increased by 40% (SNCO, 31 years, full commutation)
It was only a 40% increase because the amount you can commute decreases as you approach the 37 year service point.

iansmum

Just thought I would update this - we hadn't heard anything by today so OH phoned them this morning and was told that a letter had been sent some time ago but it hadn't arrived. Over the phone they gave him the figures and also the number for the relevant tax office to call to get it altered so it is under one code (?). It will have pretty much doubled from what it is now as you all predicted so at least the new car is safe!! My payback for all those years spent as an army wife I think!!
Thanks again for all your help.

iansmum

Hope you don't mind me bringing this up again - regarding the tax codes. It occurred to me that we may not need to do anything as after all, the pension has been paid for the past 15 years. My OH's tax code for his job is one thing and the army pension is BR - do we need to do anything or is that it? On the form sent the deduction for tax is 20% of the total so that should be right? Many thanks.

RAFRedundee

I have just got voluntary redundancy and trying to decide whether to take the commutation and get the tax free lump sum. If i take the money as an IP ie don't commute anything, then will the monthly payments still be subject to NI as well as taxable? If so this makes a big difference and would make commutation worthwhile, even with low interest rates for putting the lump sum in a savings account....

Does anyone know the answer? Thanks in anticipation!

molerat

NI is not payable on pension income.

Fergie76

This is not advice, just personal opinion, but I would commute and take the cash, you could be dead next year.

RAFRedundee

Thanks for the replies, you've cleared that up for me. Even without paying NI I'm inclined to take the money and run. As previous threads have said, it's a long wait til 55 and anything could happen!