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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 |www.raf-ff.org.uk | 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


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