Pension Transfer Value

dmm1982

Hi,

I am after some advice, I was ex soldier and left in 2006,upon leaving forces I was awarded a preserved of £1979 pounds per annum with a lump sum of 3 times the value at 60

I have am in early 30's and am wishing to transfer army pension into new emplyment pension scheme, my question is what would my transfer value be on the figure of my pension being 1979 pa and would it have increased over the last 7 years

Many Thanks

taking_stock

the value will certainly have increased in the intervening 7 years, probably to around £2500 p.a, with £7500 lump sum.

before getting into the transfer value calculation, most people would probably counsel you leave this secure index-linked pension in place, especially if considering transferring into a DC or money-purchase type scheme. If you're considering moving it into a career-average or other defined benefit scheme, then the devil will be in the details (as always).

however, as to the actual value, there are enormous number of variables, but assuming you're aged 32, the discount rate is 7.0%, inflation 2.5%, then you're looking at very roughly £24k. i cant emphasise enough how much of this calculation is based on assumptions, but it may at least give you a very rough idea.

hope that helps.

dmm1982

thanks taking stock, I thought a value was based on your life expectancy and on army website if recieveing pension at 60 than life expectancy is 20 yrs from 60 so would they not calculate it by the life expectancy years and then add lump sum onto it, its very confusing this to me in trying to work out my value, i don't want to lose money on my pension so a value of 24k is nothing really and maybe i should leave it

Devon_Sailor

Mate,

Im forces too - you would be absolutely bonkers to transfer your Army pot into an outside fund. That preserved pension will continue to rise until your retirement age at RPI (or CPI, cant remember whish, but either way its free extra money....)

Plus you get a decent lump sum, that if you moved funds, you would have to fund out of your pot total, rather than have it as a defined right already (as per AFPS).

regards,

D_S

taking_stock

the calculations do indeed take into account life expectancy, through mortality tables. the reason why it's significantly less than, say 20 times the annual pension plus cpi increases, or indeed the cost to buy an equivalent annuity is that you are aged early 30s and the standard assumption is that investment return will outpace inflation by a certain percentage - ie the amount necessary to 'buy' a £2k pa pension at age 60.

however, for what it's worth, i agree with you both that it's better off left where it is, as it'll be secure and also grow with cpi in all of the intervening years.

dunstonh

I have am in early 30's and am wishing to transfer army pension into new emplyment pension scheme, my question is what would my transfer value be on the figure of my pension being 1979 pa and would it have increased over the last 7 years

Are you sure that is a good idea? Have you checked to see whether the new scheme will take it? And what they will give you for it?

My gut feeling on this is that it would almost certainly be a bad decision to do it given the quality of the AF pension.

dmm1982

thanks guys, Im thinking about moving my pension over to the NHS pension scheme which too is a good scheme to be in and I have a really good job which ill probably be in for the next 30 years or so, obviously once I have my pension value ill be able to find out how how many years it will buy into the nhs one, just want to make sure im making the right choice, i really don't want to lose money from my army pension so if the value is decent then ill probably move it and then continue to contribute to it through the nhs, so ill have more for when i do eventually retire if that makes any sense

hyubh

dmm1982 wrote: »

Im thinking about moving my pension over to the NHS pension scheme

When did you start your current job? A transfer between the armed forces and NHS schemes would be under 'club' rules. In general, these are intended to have a neutral outcome if the old salary, uplifted for inflation, is the same as the new one, and in your favour if the pay in the new job subsequently rises faster than inflation (*). However, usually there's a time limit involved, after which a transfer between 'club' schemes would be done on a non-'club' basis instead, or even not allowed at all (in the LGPS, the default limit is 12 months from when a person starts their new job - I would assume the NHS is similar).

(*) The fact the NHS scheme will be moving to a career average rather than final salary basis in 2015 doesn't change that, since current plans are to have all pre-2015 membership (which would include any service credits from transfers in completed prior to April 2015) still go against the member's leaving salary.