22 | Features

Tebasicsabout the ADDED PENSION provision under AFPS15

We cannot remember anybody complaining about having too much money in retirement and AFPS 15 makes it easy for you to improve your pension by purchasing Added Pension. Youare never too young to save for retirement.

Surely that will tie us in to extra payments years?

In this article Mary Petley of the Forces Pension Society sets out the basics about the Added Pension provision under AFPS15 and how to get aquote.

No. Unlike the AFPS 75 or AFPS 05 Added Years contracts which committed members for the duration of their service, each AFPS 15 Added Pension contract lasts up to ayear.Contributions can be as little as a£300 lump sum or £25 per month if you prefer to pay by instalments throughout the year.You decide what you can afford –and remember,because it comes out of pay before tax, it reduces the member’s tax liability.

What does it enhance?

That is up to the member.Contributions can either boost just the member’s pension or those of his or her dependants’ too. Obviously,ifitistoboost the member’s pension AND those of his or her dependants, the cost will be greater as more is being enhanced.

Is there alimit?

Yes. £6,500 is the total overall amount of Added Pension that may be purchased. However,that would cost between £80K and £120K!

“Between £80K and £120K” sounds abit imprecise. Why so?

What acontribution will buy depends upon many factors, not only what is to be enhanced. For example, other things that can make adifference to the cost are the member’s age when the contribution is made and whether the contribution is by lump sum or by monthly instalments. It also makes adifference whether you enter

ENVOY |Spring 2018 | | Spring | w

into the contract at the beginning of the contract year or part way through. The last time Ilooked at the Added Pension cost factors, there were over adozen assumption tables!

Give me an example that will make sense to me.

Amember joins the Armed Forces at age 20 and takes out the Added Pension contract at age 38.

If he or she enhances the member’s benefits only the cost would be £1,389 as alump sum or £117 per month for 12 months.

If the member’s and the dependants’ benefits were enhanced the cost would be £1,481 as alump sum or £126 per month for 12 months.

This may look like alot of money but, remember,premiums come from pay before tax, thus reducing the member’s tax liability.

What are the pros? •Added Pension offers value for money.

•The commitment is short term –each contract lasts only ayear.What may be affordable one year may be unaffordable the next. The fact that the contract lasts only ayear gives you the flexibility to respond to all your other commitments.

•Purchasing Added Pension is tax efficient as contributions come from pay before tax, thus reducing the member’s tax liability.

•Increasing the pension will improve Early Departure Payment (EDP) benefits. This is because the EDP lump

Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52