What Do You Know About Your Armed Forces Pension Scheme? - Policy Podcast Episode 3
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- เผยแพร่เมื่อ 10 ก.ค. 2024
- What Do You Know About Your Armed Forces Pension Scheme? - Policy Podcast Episode 3
I recently had the chance to sit down with the policy leads of pay, pension and allowances. We chatted about many things to do with each of those topics and they answered a number of questions that had been submitted by the audience.
They dispel myths, explain the reasons why and add important context to many issues that surround pay, pensions and allowances.
In this third episode, James talks about the Armed Forces Pension Scheme 2015 (AFPS15). Why it was introduced, some of the benefits that come with it, why it’s actually a very good scheme, why you have to claim your pension and much more.
If you are confused about your pension then make sure to watch this.
This is our first time trying anything like this, so please do leave your feedback in the comments below and any further suggestions or questions you might have that we can answer in the next episode.
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Timecodes:
0:00 Intro
0:34 Is the Armed Forces Pension Scheme 15 (AFPS15) good?
2:05 Non-Contributory Thoughts
3:50 Why Can't The Pensions Auto-Start
5:23 Is A Pension Reform On The Way?
6:53 Why are the Pensions so Cryptic?
10:05 User Friendly Pension Forecasts
12:05 Final Words
13:40 Final Thoughts
14:20 Outro
DISCLAIMER:
The views and opinions expressed in this video are my own and do not necessarily reflect the views of the British Army or the Ministry of Defence.
I am not a professional financial advisor and this video is not financial advice. Please do your own research before making any decisions with your money and seek professional financial advice if need be.
Timecodes:
0:00 Intro
0:34 Is the Armed Forces Pension Scheme 15 (AFPS15) good?
2:05 Non-Contributory Thoughts
3:50 Why Can't The Pensions Auto-Start
5:23 Is A Pension Reform On The Way?
6:53 Why are the Pensions so Cryptic?
10:05 User Friendly Pension Forecasts
12:05 Final Words
13:40 Final Thoughts
14:20 Outro
Mate I'm deeply disappointed that you dint mention the awful EDP. why can't soldiers get their full pension after 20/40 point. Many won't make it to 68.😢
@@precociousdeathdealer202 I only had a limited time with the policy leads to cover all three topics (pay, pensions and allowances). I was unable to squeeze in EDP but I am doing future episodes with them where we can talk about that.
The pensions schemes changed as a cost saving measure and paying someone a full pension from the age of 40 or so onwards, possibly for over 40 years as average life expectancy is now into the 80s, is extremely expensive.
Something to bear in mind as well is that all other public service pension schemes that changed do not have EDP or anything like it. It is a benefit unique to us. So all things considered, its certainly a great addition. And whilst it's not as high as a full pension it certainly is better than nothing and helps relieves a lot of financial stress for those entering civilian street.
Whilst, sadly there will be some who will not make it to state pension age, the majority will. And for those individuals who sadly pass beforehand, their dependants will receive a portion of the pension and with the AFPS15, the amounts are more generous then with the previous pension schemes.
@thesavvysquaddie thanks for reply mate. I would like to counter that with a point. UK regular forces number is comically low compared to USA army so surely the uk government can pay. USA regular army will get their full pension immediately after 20 years of service. I think edp was designed to rob uk soldiers.
Something to bear in mind though is that the US spends 3.5% of GDP on their military whilst the UK only spends 2.1% and the US is by far a much bigger economy and those extra % points add up.
In 2022 the MoD Budget was around £55.5 Billion whilst in the same year, for the US Army alone it was $177.5 Billion. Just the budget for their Army alone was over 3 times that of our whole Defence Budget. The total US Budget for their military was over 10 times ours in 2022 and whilst there military is bigger than ours, it isn't 10 times bigger. And if we look at the total budget for the whole of the Department of Defence in the US, then that sat at $1.52 Trillion in FY 2023.
The US allocate much more money then the UK do to Defence and they are able to afford pensions payable after 20 years service. So not entirely a fair comparison between the two due to those huge differences in allocated budget. Also, I am sure you would agree, the Americans seem to place a greater value on those who have served.
@thesavvysquaddie Thankyou mate for such a thoughtful detailed reply. I know US military size and budget dwarfs ours. My only point was uk government cannot have it both ways. I would agree the pay and other benefits are pretty good at higher ranks but that EDP and defered pension is a complete scam. But I think deep down UK government is happy to see its military shrink to comical level.
Hi mate, love your videos, fantastic quality for the average squaddie.
Question regarding the pre-tax contributions for added pension.
At basic rate are we saving both tax & NI as it’s “salary sacrifice” so 32% or just tax at 20%. Trying to calculate if it’s worth it or not.
Thanks!
Thanks for the comment. When doing added pension, the tax relief is only income tax. You'll still pay NI calculated off of your pay before the added pension is taking out.
@@thesavvysquaddie That’s a shame, as a BR it doesn’t really seem worth the added pension, when comparing to the non-taxable benefits of the ISA/LISA combination
Perhaps it may be more valuable as a HR tax payer, however it seems a SIPP will always outperform significantly even at more realistic % increases eg 4-5%
Your videos are great savvy but unfortunately in battalion it’s not translated well enough. They make it complex for a reason .
Surely a quick win is adding either pension contributions to the payslip (so pers can see the additional value each month) and, or, a running total of the pension pot.
The Haythornthwaite Review suggested something similar early this year. But can't remember if that was in reference to pension contributions or actual accommodation charges to help highlight how much they are subsidised. But it would certainly be a great and useful implementation.
I am on the 75/15 scheme and am happy with my pension, I did a pension calculator for joining the army now and having the same career I did. The pension is much worse now
Certainly, it is not as good as it once was. But this is the same across the board for the public sector pension schemes as unfortunately the packages were cut as cost saving measures. Defined Benefit final salary pension schemes are extremely expensive. Of course, cuts are not ideal and we don't like to see them but they happen nonetheless. In my opinion, we shouldn't be comparing the pension schemes to what they used to be but instead fairly compare them to what is currently out there today. Seeing as over 50% of the Armed Forces joined in the last 8 years, they would have never been on the 75 scheme. And so it is not fair to compare their current scheme to one they would have never been on it. Instead it should be compared to what other workplace pension schemes are out there today and despite the cuts, the AFPS 15 is still one of the best workplace pension schemes available.
@thesavvysquaddie AFPS 75 was brought in to retain personnel for 22 years along with the stresses that military life brings. It seems that the original reason for bringing it in has been forgotten about and to rub salt into the wounds the pace of life in the military has gotten even worse. As I said before it's not worth doing a full career anymore .
How can a soldier on 20k, getting another 20k paid into their pension pot be 1 47th of their income? Surely that's 1:1 of their income?
The 1/47th of their income is what is added on to how much they will be paid in retirement. The cost of adding on that amount is thousands per year.
Modernise 😂 you mean screwed . Let’s not gloss over, pensions are rubbish now .
Very cynical view considering pensions across all public sectors had to change to make them more affordable. Can you explain why you think they are rubbish? Whilst not as generous as the previous schemes, the AFPS15 is still one of the best work place pension schemes out there. The pension trap is real and that's because it is so good. If it wasn't good then it wouldn't be a trap.
@@thesavvysquaddie The 75 pension scheme was certainly a trap and maybe the 05 . 15 not so much , retention is so poor now as well and pensions contribute towards this . Absolutely it’s probably fantastic compared to others but I’m in a 75 pension generation and it’s not fooling me .
Yes, it’s still a good and free pension scheme, but unlike the ‘75, there’s no incentive to remain beyond your minimum time, in my opinion. The ‘75 scheme offered milestones at 22, 30, and 35 years, based on your achievable rank.
Unfortunately, it will now become rare for highly capable and experienced personnel to stay beyond the minimum period unless they are keen on deploying every 18 months for the remainder of their career.
A personal bugbear of mine: I joined believing I was going to receive the ‘75 pension. This greatly influenced my decision to commit to joining. Now, I feel disappointed that the government has changed the goalposts without much question or consideration of the consequences for those who signed up for this offer.
Regrettably, this new pension does not contribute to our legacy schemes, and we have all started from day one on the brand new scheme from 2015 or last year. Yes, we will be starting at a higher ‘average’, but we won’t accumulate enough years on this scheme to actually make much of a difference.
BTW - great channel and content as always.
@simonball5602 I totally agree, well said.
I would disagree. The pension trap is still real for the AFPS15 and that is because of EDP which has a requirement of serving for at least 20 years and until age 40. Meet both of these and then you receive a tax-free lump sum and a monthly income up until state pension age. Certainly a trap for many people. Because leaving before meeting the eligibility criteria for it could see you lose out on 10s of thousands of pounds over the couple of decades it could be in payment for. It is even advertised as a retention benefit and it certainly does work and keeps people in. Many people I have spoken to, once they realised what EDP was and how much they would receive have decided to stay in the extra few years to meet the requirements.
If you are a member of the AFPS75, then your pension will still be calculated from the rank and time served at the point of leaving the forces and not the point at which you moved to either the 05 or 15 scheme. And that is because the Government made a commitment to protect pension benefits.
And whilst frustrating that the Government had to change many of the public service pension schemes this was due to cost saving. And arguably, they were thinking of the bigger picture by questioning and considering the consequences for the UK population rather than the small % of the population on the 75 scheme.
This is because our pensions are paid by the taxpayer and as we are all living longer, the cost on the taxpayer to be paying full pensions for thousands of public sector workers for over 40 years per person is very expensive and unless taxes were raised to meet that demand, there would have to be cuts elsewhere which could have greater negative effects.
I do understand the frustration though. The AFPS75 was objectively better in terms of financial compensation for ones service. But I do just want to make the point that whilst the AFPS15 is not as good as the legacy schemes, it is still a great scheme.
I want to hammer this point home because over 50% of the UK Armed Forces joined in the last 8 years. These individuals would have never been enrolled into the 75 scheme. And it's such a shame when I see these individuals spout that the AFPS15 is rubbish when they don't fully understand it and instead are just parroting what their seniors have said.
They are comparing the scheme that they are on to one they would have never been enrolled in. Not a fair comparison and takes away from them actually understanding the great benefits that the AFPS15 has to offer. A more accurate and fair comparison would be to other current workplace pension schemes that they could have joined had their job choice differed in which case the AFPS15 comes out on top by far.
Many junior soldiers will naturally listen to their seniors as they see them as a fountain of knowledge from whom they can learn from and gain valuable experience, which is a good thing in most cases. But it can be detrimental to junior soldiers when they hear broad statements from seniors like, "the pension is crap, it's no good anymore, way better back in my day etc." These junior soldiers do not know any better and will take what they have heard and believe it without question in many cases. They then spread that like a virus infecting all those around them creating negative sentiment surrounding the AFPS15 which is unwarranted in most cases. These junior soldiers compare their current scheme to one they were never eligible for which can be extremely detrimental and could greatly sway future life decisions which they have made based on the opinions of others rather than actual information.
Perspective and context is key. Hopefully I have provided some of that in this essay haha.