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  • FIRST POST
    soldier sam
    Commutation of Army Pension - Is it worth it?
    • #1
    • 11th Jan 07, 5:30 PM
    Commutation of Army Pension - Is it worth it? 11th Jan 07 at 5:30 PM
    I retire from the Army next month after 22 years service and will receive a full pension. I will also have a commutation option of an additional (tax free) 16,761, but if I accept it, my monthly pension drops by 170 per month! I return to my full pension on reaching the age of 55. My question is, should I take the extra money and pay it off some of my mortgage or take the full pension (all of which will be taxed) then increase my monthly mortgage payments? I worked it out that for the 16,761 they are offering, they actually take over 30,000 from me over the 15 year period! Which option would be best?? :confused:
Page 5
  • RAFRedundee
    NI Query
    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!
    • molerat
    • By molerat 24th Jun 12, 12:22 PM
    • 21,651 Posts
    • 15,879 Thanks
    molerat
    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!
    Originally posted by RAFRedundee
    Look on commutation as a loan, work out how much it is going to cost in reduced pension and how you can make that "loan" work for you. This "loan" comes with "insurance" in that if you die or are disabled it will be effectively written off and your pension or dependants pension will be paid at the full appropriate rate. Below is a link to a post I made in this thread back in 2008
    http://forums.moneysavingexpert.com/showpost.php?p=11845437&postcount=14
    Last edited by molerat; 24-06-2012 at 12:26 PM.
    https://www.helpforheroes.org.uk/give-support/donate-now/
  • RAFRedundee
    Hey thanks molerat! Lots to think about before submitting the pension request. I will do the figures again, now that I don't need to consider NI. Really appreciate the help
  • extankie
    Hi Guys,
    I left the Army in 1993 in the last phase of options for change. My question is how much will my pension be when I turn 55 this year? I have no idea and having lived abroad since then I am a little out of touch. I have received pension of 3146.16 a year since 1993. I took a lump sum of 69800 at the time. I have read here that some people are saying that the figure is twice the amount eg 6292. That cant be correct because at the time I was told that if I did not take the lump sum I would get 600+ a month. Does anyone have an idea what I should get?
    • molerat
    • By molerat 10th Jan 14, 5:56 PM
    • 21,651 Posts
    • 15,879 Thanks
    molerat
    Your full pension, i.e the amount before the commutation, is increased by inflation each year. You have had 20 years worth of inflation. To me the figure of 600 pm (7200 pa) does not really tally with the 3146 pa you have been receiving. You need the figure for your uncommuted pension to be able to work out the new value. Multiply that by 1.78 which will give you the approx inflation lift from 1993 to 2014.
    Last edited by molerat; 10-01-2014 at 6:17 PM.
    https://www.helpforheroes.org.uk/give-support/donate-now/
  • extankie
    Ref
    Thanks for that. Is there anyway to establish what my pension might have been if I had not taken the lump sum based on the figures I gave. The paperwork I got at the time has long since vanished. What percentage of the pension was the maximum that could be commuted at that time, I cant remember. If I knew that it would be simple to work out what I would have received and then I could muliply by the 1.78 that you recommended.

    Thank you again

    P.S. As you can see, I was definitely not in the Pay Corp
    • molerat
    • By molerat 11th Jan 14, 10:33 AM
    • 21,651 Posts
    • 15,879 Thanks
    molerat
    I can't remember all the figures but my pension was reduced by 1224 pa, app 21%, and I took around 9k in cash. Is your 3146 gross or net of tax ? A ballpark figure based on my own circumstances would be 2.25 times your gross commuted pension so if the 3146 is gross then your new pension will be about 7100.

    SPVA may be able to help with the figures
    SPVA Pensions Division
    Mail Point 480
    Kentigern House
    65 Brown Street
    Glasgow, G2 8EX
    Tel: 0800 085 3600
    Last edited by molerat; 11-01-2014 at 10:57 AM.
    https://www.helpforheroes.org.uk/give-support/donate-now/
  • extankie
    Thanks again. Is that figure of 7100 inclusive of the annual increases? Is that the rough figure before the index linked increases since 1993?
    • molerat
    • By molerat 20th Jan 14, 2:40 PM
    • 21,651 Posts
    • 15,879 Thanks
    molerat
    That is my rough calculation of what you will actually receive as of Apr14 taking into account inflation increases and based on my own pension increases since 1994. Without the actual figure for your uncommuted pension at discharge it is only guesswork as discharge age makes a difference to the amount and cost of commutation but I would be surprised if I was very far out. I have done these calculations for a few friends but they were all discharged at the 22yr/age 40 point so tied in with my own. Again contacting the above should be able to give you the amount to expect.
    Last edited by molerat; 20-01-2014 at 2:43 PM.
    https://www.helpforheroes.org.uk/give-support/donate-now/
  • LxBloke
    22 Year WO1
    Hiya. Without being too nosy may I ask what a WO1 22 Year pension is annually without commutation and the likely figure at aged 55. I left in 06 as WO1 but have no idea as I commuted max. Grateful for any help. Oh Im aware of the 15 x CPI RPI malarkey but just wanted 2 ballpark figures. Thanks
  • If I were a rich man
    You can get a rough idea from the pensions calculator and if you are ex serving by writing to the contacts on the link. Everything you need should be there.
    It isn't letting me post the link but Google armed forces pension calculator and the address you require is a .gov one.
    • Fergie76
    • By Fergie76 6th Mar 15, 6:34 PM
    • 2,238 Posts
    • 2,294 Thanks
    Fergie76
    Hiya. Without being too nosy may I ask what a WO1 22 Year pension is annually without commutation and the likely figure at aged 55. I left in 06 as WO1 but have no idea as I commuted max. Grateful for any help. Oh Im aware of the 15 x CPI RPI malarkey but just wanted 2 ballpark figures. Thanks
    Originally posted by LxBloke
    http://www.mod-pc.co.uk/
    • Apollonia
    • By Apollonia 6th Mar 15, 7:29 PM
    • 392 Posts
    • 962 Thanks
    Apollonia
    Hiya. Without being too nosy may I ask what a WO1 22 Year pension is annually without commutation and the likely figure at aged 55. I left in 06 as WO1 but have no idea as I commuted max. Grateful for any help. Oh Im aware of the 15 x CPI RPI malarkey but just wanted 2 ballpark figures. Thanks
    Originally posted by LxBloke
    There's a pension projection excel spreadsheet someone on arrse made:
    http://www.arrse.co.uk/community/threads/pension-increase.107740/

    See post 9 by chris951. I saved it to my PC, plugged in my IP figure and now I just have to add the latest CPI every year to get a ball park figure.

    In fact that whole thread is very useful with good explanations of how to work it all out.
  • LxBloke
    Thanks troops although I may be being thick as I couldn't use the Gov site one as it only allows you to forecast if still serving.
    As a ball park I recon I should be getting at 55 about my pension of around 12 x by 1.7 so around 20k

    that sound about right ???
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