Commutation of Army Pension - Is it worth it?

molerat · 24 June 2012 at 12:22PM

RAFRedundee wrote: »

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!

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 :eek:
http://forums.moneysavingexpert.com/showpost.php?p=11845437&postcount=14

RAFRedundee · 24 June 2012 at 5:20PM

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 · 10 January 2014 at 4:07PM

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 · 10 January 2014 at 6:56PM

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.

extankie · 11 January 2014 at 5:56AM

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 · 11 January 2014 at 11:33AM

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

extankie · 20 January 2014 at 3:34PM

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 · 20 January 2014 at 3:40PM

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.

LxBloke · 5 March 2015 at 10:32PM

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 · 6 March 2015 at 7:26AM

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.

Commutation of Army Pension - Is it worth it?

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