HM Forces Pension - Added Pension

Ivrytwr3

Not sure if anyone can help, but in 2015 HM Forces had a forced pension changeover to what in effect is a CARE scheme. One of the things that came with this is the ability to add pension.

I have requested some figures and this is the response i got:

The Added Pension runs from Apr - Apr, if you were to make monthly payments from 1 Sep 17 - 31 Mar 18:

£80 per month contribution adds £38.99 per year payable at SPA.

Obvioulsy next year i could make payments for the full year and each following year i continue to save. But my query is, is this a decent return or would £80 per month be better invested elsewhere?

Thanks.

bigadaj

Depends.

How old are you, how long are you likely to serve, what is your attitude to risk, when do you want to retire.

Paul_Herring

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Ivrytwr3

bigadaj wrote: »

Depends.

How old are you, how long are you likely to serve, what is your attitude to risk, when do you want to retire.

44, I'll probably serve another 6 or 7 years, risk - medium, retire - no plans as of yet.

But looking at this that everyone in HM Forces gets an extra £40 pension per year for 7 months of £80 per month contributions (approx £68 pension per year for £80 per month of contributions) - is this a worthwhile return?

dunstonh

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Hello Paul. not posting anything else....



...jk

But my query is, is this a decent return or would £80 per month be better invested elsewhere?

The option they are offering you is not an investment. It is a secure option. I havent looked at the armed forces one but if its anything like the Teachers one and other public sector variations, then it is good value for money in terms of income per £1 spent buying it. Although if you are looking at pensions in terms of a tax wrapper and tax efficiency (rather than income provision), you may not consider it as good as a conventional pension.

Silvertabby

You'll get tax relief on your contributions, but will pay tax on the pension purchased.

So, £80 x 12 - 20% = £768.

£68 - 20% = £54.40

768 / 54.40 = 14.11 years to break even.

Ivrytwr3

wow - that's interesting. Ty ST.

Silvertabby

I retired under AFPS75, so this wasn't an option for me.

After my 22 I went on to be a LGPS administrator - and this looks very similar to the CARE added purchase scheme offered by them.

Ivrytwr3

I'm at my 24 year point and signed onto 30 years :eek:

Just looking at ways to maximise my forces pension if possible.

I have 21 years on 75 and the remainder on the new not so good AFPS15 pension :mad:

JoeCrystal

Ivrytwr3 wrote: »

I'm at my 24 year point and signed onto 30 years :eek:

Just looking at ways to maximise my forces pension if possible.

I have 21 years on 75 and the remainder on the new not so good AFPS15 pension :mad:

Bah, it is still one of the very best pension schemes in the country and still non-contributory. Perfectly justified for the military.

kidmugsy

Silvertabby wrote: »

768 / 54.40 = 14.11 years to break even.

I think it's a mistake to calculate a payback period on an inflation-linked pension by ignoring the inflation linking.