MONEY
the 2011 pension, which was £325.78 in Apr 11, has grown a little to £342.72. Clearly we are on the downward slope of a ‘pension trough’.
Sadly, we have not got to the bottom of the trough yet! Government’s current fiscal policy in respect of public sector salaries is to award a 1% increase in 2013 and another 1% in 2014. On the assumption that CPI inflation is steady at the 2% rate for those years, the Sergeant who leaves on 11 Apr 14 will have seen the 2010 pension rate of £10,509 increase to £10,720. However, the individual who left the Services on 11 Apr 10 will have seen his already improved pension of £11,398.19 in 2012, increase to £11,626.15 in 2013 and to £11,858.68 in 2014. This means that on 11 Apr 14 the Sergeant who left in 2010 has a pension worth over £1,000 a year more than the individual leaving in 2014 – despite both having served an identical length of time.
The last time the Armed Forces Pension Scheme witnessed this phenomenon to such a degree was in the mid 1970s, and it took ten years before somebody left the Services
with a pension award that was greater than the index-linked awards of anybody who had left in similar circumstances during those previous ten years.
It was because of the perceived unfairness of this scenario that the Forces Pension Society first challenged the matter through the UK courts, and lost. It also looked at taking the matter to the European Court of Human Rights but was informed that it had no jurisdiction over a Government’s fiscal policies (which is the cause of the issue). Therefore, on the basis that there is nothing illegal with the creation of a pension trough, the Forces Pension Society made it its business to ensure that the new AFPS05 pension scheme had a mechanism built into it that would remove, or severely reduce, the Pension Trough effect – it is known as ‘dynamising’.
Call me a cynic if you like, but it is interesting to note that the Government, whilst making policy statements about salary increases for 2013 and 2014, have not taken the matter publicly to 2015 – the year of the next General Election. It would not surprise me if the public sector salary awards are significantly improved that year as a ‘reward’
for putting up with more difficult times. So, assuming that military pay and final salary pensions are lifted by more than the rate of inflation in 2015 and that pattern continues; I suspect we will see the bottom of this current pension trough in 2014.
What can you do about it? If you have just left military service with an AFPS75 pension; there’s nothing you can do. You could have switched to the AFPS05 scheme in 2006 and better protected your pension entitlements against this phenomenon, or for those who have already passed their immediate pension point, you could have left in April 2010, but those milestones are now passed.
For those still serving, you could leave. However to be better off, you would have to find a job with pay and pension benefits that are more generous than you are currently receiving – which may not be easy at a time of high unemployment and compulsory military redundancies.
For more information about your military pension and to find out about joining, please call 020 7824 9988 or visit:
www.ForcesPensionSociety.org
Injured in the line of duty?
You may be entitled to claim compensation to protect you and your family’s future.
You are entitled to claim compensation for injuries sustained whilst in a theatre of operations or in training or at any time.
For SPECIALIST ADVICE for MILITARY PERSONNEL Call FREE ON 0800 132965 or visit us at:
www.harrisfowler.co.uk
You’ve got nothing to lose and perhaps a lot to gain
www.raf-ff.org.uk Envoy Summer 2012 33
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