Where to put my Military pension

Merlin139

Brandnewstart79 wrote: »

I always thought that if it!!!8217;s under my tax free allowance I!!!8217;ll not pay tax on it?

My earnings with pension will take me to 50K so I!!!8217;ll get taxed on anything over my tax free amount?

Whatever is classed as taxable income and your Military Pension will form part of that is liable for TAX.

You will have a tax free amount £11850

You then pay 20% from £11851 to £46350

You then pay 40% from £46350 to £150,000

One thing to remember is that if you end up unemployed for any reason you will not be entitled to any JSA or UC as you pension is taken as income. You would get your NI contributions paid if you claimed JSA.

Brandnewstart79

Thanks a lot for speaking with me. Time to speak with the Forces Pension Society

Dox

ex-pat_scot wrote: »

Nope. The sensible place to look is here on this board.
Saving the £10,000 pa pension is best by using either deferral (if it is available) and / or contributing as much as you can and are allowed into a new pension..

Hardly - and your post demonstrates why. It is a single point of view based on limited information and your own personal preference, rather than a balanced and impartial overview.

Given that OP wants to retire at 55, and the minimum age for drawing a pension is likely to have risen above that by the time he gets to 55, saying it is 'best' to defer might make sense, but 'contribute as much as you can into a new pension' isn't going to help achieve that.

kidmugsy

ex-pat_scot wrote: »

you need to research "MPAA" that sets limits on how much you can continue to contribute.

No need: the MPAA limitation doesn't set in when someone draws a Defined Benefit pension. The OP is spared that complication.

atush

Brandnewstart79 wrote: »

Hi all,

I!!!8217;m leaving the Military in 3 months and have landed a job for 40k a year. I have a pension for 10k a year so ideally want to put that away and a bit of my wages each month.

Looking for best options as I!!!8217;m 40 yr old and don!!!8217;t want to work past 55 if I!!!8217;m lucky enough to achieve that.

Regards

If you are 40, doesnt your pension have a scheme age of 60? If so, how much is it being reduced to take it at age 40?


Are you already taking it? If not, how much will it be worth at age 55?

molerat

atush wrote: »

If you are 40, doesnt your pension have a scheme age of 60? If so, how much is it being reduced to take it at age 40?


Are you already taking it? If not, how much will it be worth at age 55?

Assuming AFPS 75, a full pension is payable from the 22 year point (age 40 from age 18). It will be fixed at that rate but will notionally increase with inflation until age 55 when that increased amount will be payable. Taking maximum commutation will not affect that age 55 pension amount as the increase is based on the full initial amount, the commutation amount is effectively a loan paid back by 15 years of pension reduction.


Probably worth taking the commutation as that top slice of the pension will be taxed at 40%.

Silvertabby

molerat wrote: »

Assuming AFPS 75, a full pension is payable from the 22 year point (age 40 from age 18). It will be fixed at that rate but will notionally increase with inflation until age 55 when that increased amount will be payable. Taking maximum commutation will not affect that age 55 pension amount as the increase is based on the full initial amount, the commutation amount is effectively a loan paid back by 15 years of pension reduction.


Probably worth taking the commutation as that top slice of the pension will be taxed at 40%.

As Molerat says, don't discount the commutation - when your pension is uplifted at age 55 it will be restored to its full pre-commutation value and index linked back to your date of leaving.

Mr S and I retired on the same day and we both commuted, enabling us to pay off our mortgage 19 years early. I never did get round to working out how much mortgage interest we saved, but it must have been considerable!

Brandnewstart79

Hi all and thank you for your feedback. I have 18 years on AFPS75 and 4 years on the new scheme.

Thinking commutation is the best way forward so again thank you for your help.

Merlin139

Brandnewstart79 wrote: »

Hi all and thank you for your feedback. I have 18 years on AFPS75 and 4 years on the new scheme.

Thinking commutation is the best way forward so again thank you for your help.

For your information to get an idea of what your future pension will be worth when you reach 55 you can look at the following each year. At this time pensions are notionally increased by whatever the CPI is in the 12 months to the September of each year. In September 2017 it was 3% so pensions increased in April of this year by 3%

The info can be found :

https://www.gov.uk/government/publications/public-service-pensions-increase-2018

If you look on Annex B of the multiplier tables and find when you left the Army, i.e last day of service. you will get a figure. e.g 29/06/2005 = 1.3821 you would then use this figure to multiply the amount of pension you were awarded before commutation.

Too many people are under some kind of impression that your pension doubles or trebles. £10000 with 3% increase each year will be a pension of £15580 in 15 years but if inflation has averaged slightly more than 3% then in real terms it will be worth less than £10000

Silvertabby

Too many people are under some kind of impression that your pension doubles or trebles. £10000 with 3% increase each year will be a pension of £15580 in 15 years but if inflation has averaged slightly more than 3% then in real terms it will be worth less than £10000 Posted by Merlin139

Too many people remember stories from those who left in the 1970s and 1980s who did see their pensions treble/quadruple at 55 - because many of their years between leaving and age 55 had inflationary increases of between 15% and 20%.

I had this 'conversation' with a friend who retired in 1998 and who based all of his retirement finances on the belief that his pension would quadruple at 55. I showed him the pension increase tables, which showed an increase of 40% - but he still didn't believe me, insisting that the rules were different for the Armed Forces. He believed me when he got his first post age 55 payment.